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A chemical is manufactured in two processes, x and y. Data for process Y for last month are as follows:
Material transferred from process X – 2000 litres @ $4 per litre
Conversion costs incurred – $12240
Output transferred to finished goods – 1600 litresNo losses occur in the process.
Closing work in progress is fully complete for material nut is only 50% processed.
What is the value of the closing work in progress?
Material is fully complete and so is $4 per unit.
Effective units for conversion costs:
1600 are full complete, WIP is 50% complete so effective units – 400 x 50% = 200.
Total effective units = 1600 + 200 = 1800.So cost per effective unit = 12240 / 1800 = 6.80.
Value of WIP: materials 400 x $4; plus conversion costs 400 x 50% = $6.80
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