At the end of the accounting period, there may be some work-in-progress, i.e. semi-finished goods may be
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Question:
At the end of the accounting period, there may be some work-in-progress, i.e. semi-finished goods may be there in a process The valuation of such work-in-progress is done in terms of equivalent or effective production.
There are different methods for calculating equivalents.
Required:
illustrate how the value of equivalent units and closing work in progress varies depending on the method used for calculating equivalent units.
Sample answer format as the following tables : (Note if you will not answer with the same format leave the question)
Solved Problem | |||||||||
Input | 2000 | ||||||||
Normal loss | 100 | ||||||||
Actual loss | 140 | ||||||||
Abnormal loss | 40 | ||||||||
Finished good | 1400 | ||||||||
Closing WIP | 460 | ||||||||
Step 1 Statement of Equivalent unit | |||||||||
Input Units | Output | Units | Equivalent Units | ||||||
Materials | Labour | Overheads | |||||||
Degree of Completion | Equivalent Units | Degree of Completion | Equivalent Units | Degree of Completion | Equivalent Units | ||||
2000 | Normal loss | 100 | |||||||
Abnormal loss | 40 | 100% | 40 | 100% | 40 | 100% | 40 | ||
Finished good | 1400 | 100% | 1400 | 100% | 1400 | 100% | 1400 | ||
Closing WIP | 460 | 75% | 345 | 50% | 230 | 50% | 230 | ||
2000 | Total | 2000 | |||||||
Equivalent units | 1785 | 1670 | 1670 | ||||||
Step 2 Statement of cost per equivalent unit | |||||||||
Element of cost | Cost | Equivalent unit | Cost per equivalen unit | ||||||
Materials: | |||||||||
Units introduced | 5800 | ||||||||
Direct material | 1440 | ||||||||
7240 | |||||||||
Less: Scrap value of normal loss (1x 100) | -100 | ||||||||
Material cost | 7140 | 1785 | 4 | ||||||
Direct labour | 3340 | 1670 | 2 | ||||||
Overhead | 1670 | 1670 | 1 | ||||||
OR | |||||||||
Material | Labour | overhead | |||||||
Cost incurred | 7140 | 3340 | 1670 | ||||||
Equivalent unit | 1785 | 1670 | 1670 | ||||||
Cost per equivalent units | 4 | 2 | 1 | ||||||
Step 3 Statement of Evaluation | |||||||||
Particulars | Element of Cost | Equivalent Units | Cost per unit | Cost | Total Cost | ||||
Abnormal Loss: | Materials | 40 | 4 | 160 | 280 | ||||
Labour | 40 | 2 | 80 | ||||||
Overheads | 40 | 1 | 40 | ||||||
Finished goods: | Materials | 1400 | 4 | 5600 | 9,800 | ||||
Labour | 1400 | 2 | 2800 | ||||||
Overheads | 1400 | 1 | 1400 | ||||||
W-I-P | Materials | 345 | 4 | 1380 | 2,070 | ||||
Labour | 230 | 2 | 460 | ||||||
Overheads | 230 | 1 | 230 | ||||||
12,150 | |||||||||
Process 1Account | |||||||||
Particulars | Units | OMR | Particulars | Units | OMR | ||||
Units introduced | 2000 | 5800 | Normal loss | 100 | 100 | ||||
Direct material | 1440 | Abnormal loss | 40 | 280 | |||||
Direct labour | 3340 | Finished goods | 1400 | 9800 | |||||
Production Overhead | 1670 | Balance (WIP) | 460 | 2070 | |||||
2000 | 12250 | 2000 | 12250 | ||||||
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
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