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This topic contains 6 replies, has 2 voices, and was last updated by kirit 1 year, 5 months ago.

- AuthorPosts
- March 18, 2017 at 11:25 am
A firm uses job costing. 3 jobs in a period are worked as follows:

Job BA

OWIP $22760

DM for the period $4620

DL $12,125Job DC

OWIP $3190

DM $11660

DL $10520Job FE

OWIP $0

DM $14335

DL $7695OH are absorbed at 40% of Prime cost in each period.

Job DC & FE remained incomplete at the end of each periodWhat is CWIP value ?

Job BA- already completed

Total Prime Cost for Job DC+FE = $44210

DC=$11660+$10520 =$22180

FE= $14335 + $7695 = $22030$44210*0.4= $17684

I went wrong here.

The answer says:

($11660+$10520+$14335 + $7695) * 1.4Why have they multiplied by 1.4 and not 0.4 please ?

Thanks

March 18, 2017 at 6:06 pmIts same as you’ve calculated. Just a bit mathematics.

$44210(100%) + $44210*40% = $44210*140% or $44210*1.4

The $44210 amount is 100% with which a further 40% of the same amount is added. Meaning that the total resulting sum is 140% of $44210.

You were 100% right in your approach. All you had to do was to simply match your answer with that of the book.

Hope it helped you.

May 24, 2017 at 11:19 amHello,

I need your help please. I’m going over this question again. Thanks.

$44210 (100%) What does this represent please ?

Does it represent the 100% completed job BA ?May 24, 2017 at 12:40 pm100% or 1 ($44210)

It’s the total DL + DM isn’t it ? The prime cost ?May 24, 2017 at 7:16 pmAs i’ve said earlier, there’s some maths in these type of questions. All you need to do is understand the principle and practice more questions to get a good grip.

Whenever we are calculating a % of any amount, the base (amount on which on which a certain % is to be calculated) is always 100%. For e.g. Prime Cost in this question.

I’m calling it ‘base’, otherwise its officially called ‘Net Amount’.Prime Cost = Base amount = $44,210 (100%)

Because the OH is to be calculated on this amount.

So,

Overheads = $44,210*40% = $17,684The resulting amount, which is the sum of both amounts is Gross amount. For e.g. the CWIP in this question.

CWIP = Gross amount = $44,210+$17,684 = $61,894

May 24, 2017 at 7:35 pmNow, i’m gonna explain the mathematics a bit more.

CWIP = 44,210 + 44,210*40%

Since, 44,210 is 100%, so

CWIP = 44,210*100% + 44,210*40%Now, you can see that the same amount is multiplied with 2 different percentages. We can simply use the sum of both % amount i.e 140%

CWIP = 44,210*140%

As, 140% = 1.4, so

CWIP = 44,210*1.4 = 61,894May 25, 2017 at 11:52 amThank you.

Thank you for the full explanation as well. Gratefully appreciated. - AuthorPosts

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