Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › FIFO Cost of Production
- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.
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- March 31, 2022 at 12:22 pm #652412
Hello Sir,
I hope you are doing well.
I will be sitting for MA exam this month. I have seen all your lectures and have gone through notes as well, Yet i am facing an issue with FIFO Cost of production valuation.Can you please tell me process account for the following question.
My values are :-
OWIP = 50 x $20 = $1000
Finished Work = 1800 x $30 = $54000
CWIP = 100 x $10 = 1000 & 50 x $20 = $1000.AXL Ltd operates a process costing system. Details of Process 1 are
as follows.
All materials used are added at the beginning of the process. Labour
costs and production overhead costs are incurred evenly as the product
goes through the process. Production overheads are absorbed at a rate
of 100% of labour costs.
The following details are relevant to production in the period:
Units Materials Labour and production
overheads
Opening inventory 200 100% complete 75% complete
Closing inventory 100 100% complete 50% completeOpening inventory
Costs associated with these opening units are $1,800 for materials. In
addition $4,000 had been accumulated for labour and overhead costs.
Period costs
Costs incurred during the period were:
Materials $19,000
Labour costs $19,000
During the period, 2,000 units were passed to Process 2. There were
no losses.
The company uses a FIFO method for valuing process costs.
Required:
Calculate the total value of the units transferred to Process 2.Looking forward for your response.
Thank YouMarch 31, 2022 at 3:23 pm #652431Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and explanations!
The value of the opening WIP is given in the question and is 1,800 + 4,000 = 5,800.
During the period, they produced 2,000 – 200 = 1,800 units from start to finish.
Therefore the effective units produced during the period were:
Materials: 1,800 + 100 = 1,900
Labour + o/heads: (200 x 25%) + 1,800 + (100 x 50%) = 1,900Therefore the cost per unit of work done this period is:
Materials: $19,000 / 1,900 = $10
Lab + o/h: $38,000 / 1,900 = $20Therefore the value of units transferred to process 2 is:
5,800 + (200 x 25% x $20) + (1,800 x $30) = $60,800.
(The value of the closing WIP is not asked for, but is (100 x $10) + (100 x 50% x $20) = $2,000.)
March 31, 2022 at 6:10 pm #652443I just wanted to clear my doubt.
This helped, Thank you.April 1, 2022 at 7:31 am #652492You are welcome.
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