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Wip days

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Wip days

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by LMR1006.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 23, 2023 at 4:00 am #692435
    krrish2005
    Participant
    • Topics: 138
    • Replies: 229
    • ☆☆☆

    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?

    September 23, 2023 at 6:32 am #692437
    krrish2005
    Participant
    • Topics: 138
    • Replies: 229
    • ☆☆☆

    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 this

    September 23, 2023 at 8:40 am #692440
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1512
    • ☆☆☆☆☆

    For 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 FG

    In 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 FG

    However

    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 it

    September 23, 2023 at 8:47 am #692441
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1512
    • ☆☆☆☆☆

    In 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 know

    I 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

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