Question1 The following information relates to WaWa Ltd a manufacturer of diaper
ID: 2578576 • Letter: Q
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Question1 The following information relates to WaWa Ltd a manufacturer of diapers. Work in process, 1 July 2016 25,000 units $75,000 $85,000 Direct material costs Conversion costs Costs incurred during July Direct material costs Conversion costs Total number of units started in July Number of units transfer ed to Finished Goods in July $219,600 $436,272 120,000 units 125,000 unit 18,000 units Work in process * Direct material 100% complete, conversion 60% complete ** Direct material 100% complete, conversion 40% complete , 31 July 2016* Diapers are inspected at the end yf the production process and any spoilage is considered abnormal. You may assume that all spoilage comes from units started in Juty Required: Using FIFO process costing, compute a production cost report for July 2016 inventory at 31 July 2016, and (ii) value of spoilage. (Show the cost per (17 marks) Based on the information obtained in (a) write journal entries to record the (a) showing (i) cost of goods completed in July, (ii) value of work in process equivalent unit to the nearest cent clearly for each cost category) (b) transfer of completed products at the end of July and the spoilage for July. (4 marks) Explain if there will be any significant difference in the values of completed units (Narrations are not required). (c) calculated using FIFO or Weighted Average process costing? Support your answer with relevant computations. 6 marks)Explanation / Answer
WORKINGS
EFFECTIVE UNITS
PERIOD COSTS PER UNIT = TOTAL COSTS IN PERIOD
EFFECTIVE UNITS
$219600 + $436,272
117,200
$5.60 per unit
a)
i) cost of good completed= 125000 units $703872
ii) cost of WIP = 18000 UNITS, $$100800
iii) cost of spoilage = 2000 units x $5.60= $11200
PROCESS A/C
UNITS
$
UNITS
$
Brought fwd
25000
160000
ADDED DURING JULY
120000
Trf to Finished Goods
125000
703872
DIRECT MAT
219600
Spoilage
2000x $5.60
11200
CON COSTS
436272
Carried down
18000
100800
145000
815872
145000
815872
b)
JOURNAL ENTRY: DEBIT TRADING A/C $703872
DEBIT INCOME STATEMENT A/C $11200
CREDIT PROCESS A/C $715072
c)
If it is done by weighted average then the costs would be:
Effective units would be : Transfers to FG= 125000
+ work contained in Closing WIP = 7200
= 132200
Costs involved are = $$815872/132200= $6.17
Thus
Closing WIP = 18000 X 40% X $6.17 = $44424
Finished Units = 125000 x $6.17= $771250
UNITS
$
UNITS
$
Brought fwd
25000
160000
ADDED DURING JULY
120000
Trf to Finished Goods
125000
703872
DIRECT MAT
219600
Spoilage
2000x $5.60
11200
CON COSTS
436272
Carried down
18000
100800
145000
815872
145000
815872
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