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Hi Sir
I’m having a problem answering this Question(paraphrased)
Opening wip: 200u valued as ff:
Mat. $2400
Lab. $1200
O/H. $200
NB (No degree of completion was given in this Question)
No losses occur…
Units added:
Mat. $6000 (500 units)
Lab. $3350
O/H $1490
Closin WIP=100 units complete as follows
Mat (100%), Labour (50%), O/H (30%)
I got the equiv.units correct for o/h at 630 ie 200(op. WIP)+400(started & finished)+ 30u(portion of clos.WIP)
Second part of the question wants value of units transferee to process 2
My WORKINGS:
Cost per equiv. uni(to the nearest cent): material=$6000/700=$8.57; Lab($3350/650)=$5.15; O/H($1490/630)=$2.37
Therefore valuation of finished o/put:
Cost of finishing the Op.WIP( I assumed they were ALL 100% incomplete since it wasn’t specified):200u*(8.57+5.15+2.37)=$3218
Add: money spent last month:$2400+$1200+$400=$4000
WORK STARTED & Finished:
400u*($8.57+$5.15+$2.37)=$6436
I got a tot. Of $13654 and BPP’s answer is $13200
I must’ve done s/thing wrong somewhere. Kindly helpThanks in advance
In future, please ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other.
You have used a FIFO approach, however since you are not given the degree of completion of the opening WIP you have to use the WACC approach.
So, if I do the workings for the labour cost, you should be able to finish the others.
Total labour cost: 3,350 + 1,200 (spent last year) = 4,550
Total units: 600 (finished) + 50%x100 (closing WIP) = 650
Cost per unit for labour = 4550/650 = $7You do the same for materials and for overheads.
You then value all 600 finished units at the same total cost (the total of the unit costs for materials, labour, and overheads).(I think you have copied the overhead cost wrongly – if not then BPP have made a typing mistake. The unit cost for materials is $12, the unit cost for overheads should be $3 which means the total of the value of WIP and spent this year should be 1890 (on your figures it is 1690))
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