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A company operates a process costing system using the 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 relate to cost period:
Opening WIP Units 2000
Degree of Completion 60%Total number of units completed 14000
Closing WIP Units 3000
Degree of Completion 30%Costs arising:
materials $ 51000
conversion $ 193170What is the value of closing WIP for the period?
Please don’t simply set test questions and expect an answer.
You must have an answer in the same book in which you found the question and so you should ask about whichever part of the answer you are not clear about – then I will help you.Have you watched my free lectures on process costing (because if you have then you should find this a very straightforward question)?
The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.
hello sir, this is a question from the f2 practice questions here.. I tried working it out but got the answer wrong. The workings available show that materials was to be divided by (12000 + 3000). i cannot understand where the 12000 came from..
Here is the workings and answer:
material cost = $51000/(12000+3000) = $3.40 p.u
conversion cost = $193170/(2000*40%) + 12000 + (3000*30%) = $14.10 p.uValue of closing WIP = (3000*3.40) + (3000*30%*$14.10) = $ 22890
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