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At the end of period the percentage completion of the work in progress in a continuous manufacturing process was over estimated. What effect would the correction of the error have on the cost per equivalent unit and the total cost of output completed in the period?
A. Unit cost: Increase, Cost of output: Decrease
B. Unit cost: Decrease, Cost of output : Increase
C: Unit cost: Increase, Cost of output: Increase
D. Unit cost: Decrease, Cost of output: DecreaseSir, can you please help me with this question.
They asked cost of output completed, does it mean completed frm the WIP or completed from the completed finished goods?Thank you
If the % completion is over-estimated then the equivalent units will have been too high and therefore the cost per equivalent unit will have been to low.
so correcting it will increase the unit cost.If we increase the unit cost, then the cost of the output completed will also increase.
Thank-you sir your videos are very helpfull indeed
Sir what is the nature of process account (asset,expense) what’s the concept behind preparing a process accountIt is an asset account, although that is completely irrelevant as far as Paper F2 is concerned (we are not dealing with financial accounting in Paper F2).
There is no ‘concept’ the purpose of the account is to combine the various manufacturing costs in order to get the full cost of both finished goods and work-in-progress.
Vare produces various inks at its Normanton factory. Production details for Process 1 are as follow:
Opening WIP, 1 April 400 units 60% complete
Closing WIP, 30 April 600 units 20% completeUnits started 1000
Units finished 800The degree of completion quoted relates to labour & overhead costs. Three-quarter of the materials are added at the start of the process & the remaining quarter added when the process is 50% complete. The company uses FIFO method of cost allocation.
The equivalent units of production for materials in the period are:
A 1250
B 1000
C 850
D 680Good day sir, could please explain me how you come to answer of that question please?
Many thanksThe opening WIP is more than 50% complete and so will already have all the materials, so there are no extra materials in this period.
Of the 800 units finished, 400 of them were opening WIP and so only the other 400 were done completely this period and these 400 will have the full materials.
The closing WIP are only 20% complete and so they will only have 3/4 of the material and so there are 600 x 3/4 = 450 equivalent units.
So the total equivalent units are 400 + 450 = 850
Thank you very much for your prompt response. But I must admit that it is very easy to get confused with all the different costs that occur.
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