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The details of a process are as follows:
material $98,000
labour $60,000
production overheads $39,000
units added to process 2 are 1,000 units.
There were 200 units of opening work in progress valued as follows:
material $22,000
labour $6,960
production overheads $3,000
There were 300 units of closing work in progress fully completed as to material 60% to labour and 50% to production overheads.Prepare a Process a/c using the average costing method.Please do not simply set me a question to answer – you must have an answer in the same book in which you found the question 🙂
You should watch the free lectures on process costing.
If you then still have a problem then ask about which bit of the answer is giving you the problem.
(Incidentally, you cannot be asked to prepare a process account in Paper F2. You will be asked to either calculate the value of the completed units, or to calculate the value of the closing work-in-progress.)
sorry about that I calculated equivalent units for :
materials to be 1,300 units
labour to be 1,180 units
production overheads to be 1,150 units
I calculated cost per unit for material to be (22,000+98,000)/1,300 = $92.308
labour to be (60,000+6,960)/1,180 = $56.746
production overhead (39,000+3,000)/1,150 = $36.521
When I calculate the fully completed units:(1,000*$92.308)+(1,000*$56,746)+(1,000*$36.521) = $185,575
But now I am not sure on how to calculate the closing work in progressHave you watched the lecture?
The equivalent units for materials is 1200 (200 WIP b/f + 1000 added; 900 complete + 300 WIP c/f)
So the cost of materials is 120,000 / 12,000 = $10 per unit.
The equivalent units for labour is 900 + (60% x 300) = 1080
So the labour cost per unit = 66960 / 1080 = $62 per unit
The equivalent units for overheads is 900 + (50% x 300) = 1050
So the overhead cost per unit = 42,000 / 1050 = $40 per unit.
Giving a full cost per unit of $112 per unitThe value of the completed units, is therefore 900 x $112
For the WIP, you value the materials, labour and overhead elements separately and then add them up. If the overheads (for example) are 50% finished, then you value the overhead element at 50% of unit cost.
You really must watch the lecture – I cannot simply type out the lecture here.
Thank you for your help after watching the lecture I understood how to calculate the closing work in progress 🙂
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