Using the process data (10,000 units started, 8,000 completed, 2,000 in progress that are 100% complete for materials and 50% for conversion; materials cost £60,000 and conversion costs £44,000), what is the value of the closing work in progress, to the nearest pound?
Answer and explanation
Correct answer: B. £16,889
- Step 1: Materials: 10,000 equivalent units, so £60,000 ÷ 10,000 = £6.00 per unit.
- Step 2: Conversion: 9,000 equivalent units, so £44,000 ÷ 9,000 = £4.8889 per unit.
- Step 3: Closing WIP = 2,000 × £6.00 + 1,000 × £4.8889 = £12,000 + £4,889 = £16,889.
Answer
£16,889.
Why not the others: £21,778: This values the work in progress as if it were fully complete for conversion costs. £12,000: This values only the materials in the closing work in progress and leaves out conversion costs. £20,800: This spreads total cost over the 10,000 units started without using equivalent units.
Practise more Cost accounting methods.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.
More Cost accounting methods questions
- In a process, 10,000 units were started and 8,000 completed. The closing work in progress of 2,000 units is 100% complete for materials and…
- In a process, 5,000 kg of input cost £47,500. Normal loss is 10% of input and can be sold as scrap at £2 per kg. Actual output was 4,300 kg.…
- Using the same data (cost per expected kg £10.3333, 5,000 kg input, normal loss 500 kg, actual output 4,300 kg), how many kg of abnormal los…
- A job used materials costing £3,200 and 40 direct labour hours at £15 per hour. Production overheads are absorbed at £8 per direct labour ho…
- A batch of 500 units has set-up costs of £1,200, direct materials of £4,000, direct labour of £3,000 and variable overheads of £800. What is…
- A transport company runs a bus service and incurs £74,400 total costs in a month. Buses carried 12,000 passengers over an average journey of…