A business makes one product that passes through a single process. This business
ID: 2569147 • Letter: A
Question
A business makes one product that passes through a single process. This business uses weighted average costing. The details of the process for the last period are as follows Material $98,000
Labour $ 60,000
Production overheads $ 39,000
Units added to the process $ $1,000
There were 200 units of operating WIP which are valued as follows:
Material $22,000
Labour $ 6,960
Production overheads $ 3,000
There are 300 units of closing WIP fully complete as to materials but only 60% complete for labour and 60% complete for overheads. There was no process losses
Required:
a) Calculate the lost to be assigned to completed output for the period
b) Why is it necessary to calculate equivalent units
Explanation / Answer
a.
Cost to be assigned to Finished goods= 180800 and WIP= 48160
b. It is necessary to calculated equivalent units so that cost of goods sold and inventory balance in WIP can be calculated in the financials.
Units Material Labor Overhead Total Ref Opening 200 22000 6960 3000 31960 Addition 1000 98000 60000 39000 197000 A Total cost 1200 120000 66960 42000 228960 Material Labor Overhead a Closing WIP in units 300 300 300 300 b Transferred to Finished goods 900 900 900 900 Total units 1200 1200 1200 1200 c % of completion of WIP 100% 60% 60% d= a*c Equivalent units WIP 300.00 180.00 180.00 e Finished goods 900 900 900 f Total equivalent units 1,200.00 1,080.00 1,080.00 g= A/f Equivalent cost per unit 100.00 62.00 38.89 h= e*g Cost of finished goods 90000 55800 35000 180800 i= d*g Cost of WIP 30000 11160 7000 48160Related Questions
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