Process Costing Part5

ACCA F2 - Management Accounting

FIFO

Opening WIP (For 5kg of Material = $10, =100% complete, Labor and overhead = 60% complete =$18

Material  Unit Material Cost Processing Unit Processing Cost Opening  WIP to be complete in the period - - incomplete process 40% = 2kg ($12 is included in **) Started and completed in  the period 50Kg $100 50Kg $312 ** Started and not completed WIP 10Kg $30 2.5Kg $15 Equivalent 60Kg $130 54.5Kg $327 Cost per equivalent unit =130/60 =$2.1667 =327/54.5 =$6 Total Cost per Kg = 2.1667+6 =$8.1667 ****

Started and completed in period (50kg Material = $100, Labor and overhead = (6*50)+(6*0.4*5) =$312 Cost incurred for the period in closing WIP are $20 for material and $15 for labor Note=(6*0.4*5) or $12 not included in opening WIP for 40% incomplete process is accounted here

Closing WIP (For 10kg of Material = $30, =100% complete, Labor and overhead = 25% complete =$15

	Process 1 account (treat like inventory)
Increase Debit	kg	$	Total	Decrease Credit	kg	$	Total
Opening Material Conversion	5 3	2 5	10 15	Opening work completed left conversion Started in period and completed	5 3 2 50	2 5 6 8.1667	10 15 12 408
Input for the period Material Conversion	60 54.5	6	130 327	Closing Material Conversion	10 2.5	2.1667 6	22 15
			482				482

Cost per equivalent unit = 8****

Expanding Production Situation:

Process 2 (Assume that the finished product form process 1 are transferred to this process

Material Y - 2kg @ $20/kg                                         Conversion charge -$12 per kg of material Y

Process 2 account
Increase Debit	kg	Total $	Decrease Credit	kg	Total $
Transfer form process 1	-	445
Material	2	40	Normal loss	-	-
Conversion		24	Finished goods	57	509
	57	509		57	509

Average cost per unit = 509/57 = 8.9298