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Process Costing

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Process Costing

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 25, 2022 at 6:30 pm #654418
    TMaC123
    Participant
    • Topics: 20
    • Replies: 24
    • ☆

    Hi John,

    Can you help clarify this question:

    Vare produces various inks at its Normanton factory. Production details for Process 1 are as
    follows:

    Opening work?in?progress, 1 April 400 units 60% complete
    Closing work?in?progress, 30 April 600 units 20% complete

    Units started 1,000
    Units finished 800

    The degree of completion quoted relates to labour and overhead costs. Three?quarters of
    the materials are added at the start of the process and the remaining quarter added when
    the process is 50% complete. The company uses the FIFO method of cost allocation.

    What are the equivalent units of production for materials in the period?

    Answer: 850

    I understand that 400 units were started and finished for the period but confused about the calculation for the equivalent units for the opening WIP (400×0%) and calculating the equivalent units for the closing WIP (600×75%). If they have added 75% material at the start and then another 25% half way through, should the materials not be 100% complete by the end of the process?

    April 26, 2022 at 10:21 am #654436
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The opening WIP are more than 50% complete and so all of the materials will already have been aded and no. more are needed in this period.

    The closing WIP is less than 50% complete and so only 75% of the material will be included.

    April 26, 2022 at 6:55 pm #654460
    TMaC123
    Participant
    • Topics: 20
    • Replies: 24
    • ☆

    Thanks John, I was confusing myself with the 50% complete part and missed the 60% and 20% complete for opening and closing WIP. Makes sense now you have explained.

    April 27, 2022 at 8:55 am #654469
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
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