Question 2.

Clips Ltd who manufacture paper clips use a weighted average process costing system. Other information relating to May's activities is given below:

Work in process 1 May - 20,000 units

Direct material (100% complete)

$50,000

Conversion cost (10% complete)

$7,200

Units started during May

30,000 units

Units completed during May and transferred out to finished goods inventory

40,000 units

Work in process , 31 May:

10,000 units

Direct materials (100% complete)

Conversion (50 % complete)

Direct material costs incurred during May:

$90,000

Direct labour costs incurred during May:

$86,000

Manufacturing overhead costs incurred during May:

$107,500

Total Costs to account for: $340,700

Required: (where necessary round off all figures to two decimal places)

Answer the following question using the weighted average method. Show all workings.

(a) Explain to Clips Ltd the two methods available for treating beginning work in process (WIP) inventory).