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In your free lectures on process costing wip eg 1 you are saying that 60% 200 is equivalent to 30% 120 and its equivalent unit ? is it
i didnt get it how its equivalentFor labour, they have done 60% of the work on 200 units. This will take the same time and therefore have the same cost as if they had done all the work on 60% x 200 = 120 units.
Similarly for overheads, doing 30% of the work on 200 units will have the same cost as if 100% work had been done on 30% x 200 = 60 units.
the following information is available for a production process for the last period :
materials input 200kg at $4 per kg
labour input 100 hours at $15 per hour
Department overhead $1000
Transfer to finished goods 150 kg
Normal loss is 10% of input. Losses are identified when the process is 50% complete.
There is no opening or closing Work in progress.what is the total cost of completed units?
A. $22
B. $20.48
C. $19.59
D.$18.33I didnt get what does the question
means about losses are identified when the process is 50% complete? And answer behind didnt explain it…. pls hlp me sirThe fact that losses are identified when the process is 50% complete means that as far as any abnormal losses are concerned they will be valued at the material cost together with 50% of the labour cost.
Because the question says that is when losses are identified!!
There is no WIP and therefore the actual loss is 50 kg (200 – 150). The normal loss is 20 kg (10% x 200), and therefore the abnormal loss is 30 kg.
When calculating the cost per kg, then for materials it will be spread over the finished units plus the abnormal loss (as explained in my later lectures), whereas for labour and overheads it will be spread over the finished units plus half of the abnormal loss (because half of the work had been done when they were lost).
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