- This topic has 3 replies, 2 voices, and was last updated 1 year ago by
.
- Posts
Sir the denominator used in wip days is production cost….i dont understand exactly what is it
In wip ledger we will have opening wip then the cost of material labour expense on debit side and
closing wip and cost of finished goods on credit side(the cost of finished goods will then go to finished good ledger)
So in all this what is production cost?Also sir the formula for raw material holding days is raw material/material usage *365
Most of the question provide information like the raw material is x% of the COST OF SALES.
they directly use the x% of cost of sales as the material usage.
But i don’t understand one thing that following the above method we only get the material usage for the finished goods that are sold
But in reality for a given year the material usage will be for work in progress as well as those goods that are finished but not sold
So why don’t they include thisFor WC cycle in questions you are often only given a figure for COS
So in MOST questions you are not asked to do RM and WIP just FG
WC cycle = Inventory days + Receivables days – Payables days.
This would be FGIn answer to your question
Production Cost:
Cost of production refers to the total sum of money needed for the production of a particular quantity of output.
It is specifically the cost incurred in production/manufacturing i.e. turning the raw materials into finished products. Production costs include, direct materials, labour, overheads, R&D. In short, production cost stops when the final product is ready for sale, while the cost of sale is basically production costs plus the cost of marketing.You are focusing on something you do not need to!!!
Most questions will have only one figure for Inventory that is FGHowever
RM inv / Material usage * 365 You would have to be given material usage for this
WIP inv / Production cost * 365 You would have to be given production cost or it will be clear what this figure is
FG inv/ COGS * 365 You would have to be given COS or information to calculate itIn my experience of you over the last week…..you focus on the wrong areas
Think very carefully before asking a question
Is this important to knowI can’t help but think you need to watch the lectures more and read the notes again.
Don’t do too many questions from different books
Different publishers have different styles and variations in questions
That is what I think is confusing you
- You must be logged in to reply to this topic.