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A company operates a process costing system using FIFO method of valuation. No losses occur in the process.All materials are input at the commencement of the process.Conversion costs are incurred evenly through the process.
The following data relate to last period:
Opening WIP
-2,000 units , 60% of degree completion
Total no of units completed
-14,000 units
Closing WIP
-3,000 units , 30% of degree completionCosts arising:
Materials – $51,000
Conversion- $193,170what was the value of the closing WIP for the last period ?
So,according to the answer given ,
Material cost per unit = [51,000 ÷ (12,000 + 3,000)] = $3·40
Conversion:
Cost per equivalent unit = [193,170 ÷ (12,000 + 0·40 × 2,000 + 0·30 × 3,000)] = 193,170 ÷ 13,700 = $14·10
Closing inventory valuation = (3,000 × 3·40) + (900 × 14·1) = $22,890I got right with my calculation except for the calculation of material cost per unit which is $3.40. My calculation is $51,000/13,700. I need your help sir .
Since material are all input at the start of the process, the opening WIP is 100% complete for materials, and so is the closing WIP.
14,000 units were completed, but this includes the 2,000 units of opening WIP. They had already had the materials, so that leaves 12,000 units.
In addition they started 3,000 closing WIP. The will have had all the materials as well.So the total for materials is 12,000 + 2,000 = 15,000 units.
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