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Good Afternoon,
D Co produces a certain food item in a manufacturing process. On 1 November, there was no opening inventory of work in process. During November, 500 units of material were input to the process, with a cost of $9000. Direct labour costs in November were $3840. Production overhead is absorbed at the rate of 200% of direct labour costs. Closing inventory on 30 November consisted of 100 units which were 100% complete as to materials and 80% complete as to labour and overhead. There was no loss in process.
What is the full production cost of completed units during November?
The answer is 16800.
Please can you explain how this was answered?
Ellis Co uses process costing to value its output. The following was recorded for the period:
Input Materials 2000 units at $4.50 per unit
Conversion costs 13,340
Normal Loss 5% of input valued at $3 per unit
Actual loss 150 unitsThere was no opening or closing inventories.
What was the valuation of one unit of output to one decimal place?
Input costs = 2000 units x $4.50 = $9000
Conversation costs = $13340
Normal Loss = 5% x 2000 units x $3 = $300
Expected output = 2000 units – 100 units = 1900 unitsPlease can you explain where the 100 units came from?
Thanks
The normal loss of 5% of input. Therefore they expect to lose 5% x 2,000 = 100, and expect to produce 2,000 – 100 = 1,900 units.
Have you watched my free lectures on process costing? The lectures are complete free course for Paper MA and cover everything needed to be able to pass the exam well.
Thank you John.
As mentioned above there was another question I asked.
D Co produces a certain food item in a manufacturing process. On 1 November, there was no opening inventory of work in process. During November, 500 units of material were input to the process, with a cost of $9000. Direct labour costs in November were $3840. Production overhead is absorbed at the rate of 200% of direct labour costs. Closing inventory on 30 November consisted of 100 units which were 100% complete as to materials and 80% complete as to labour and overhead. There was no loss in process.
What is the full production cost of completed units during November?
The answer is 16800.
Please can you explain how this was answered?
When you have more than one question, please post them as separate posts.
The BPP answer shows all the workings, so please tell me which bit of the workings you are not clear about and then I will explain.
(I assume that you have watched my lectures on process costing? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well 🙂 )
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