Question

QUESTION 1                                                                                                            

The Cutting Department of Oak Ltd has the following production and manufacturing cost data for March:

Work In Process inventory, Beginning Balance	20,000
Units started into production	60,000
Work In Process inventory, Ending Balance	10,000
Units transferred to next production department	70,000
	Materials	Conversion
Percentage completion WIP, Beginning Balance	40%	10%
Percentage completion WIP, Ending Balance	60%	30%
	AED	AED
Cost beginning WIP Balance	250,000	180,000
Cost added during the month	686,000	264,000

(Assume that the company uses the weighted-average method of accounting for units and costs)

1. Determine the equivalent units for July for the Finishing Department.                                     
2. Compute the costs per equivalent unit for July for the Finishing Department.                        
3. Determine the total cost of ending work in process inventory.                                                     
4. Determine the total cost of units transferred out.                                                                           

Answer 1

From the above computation we can get the following:

Cost of units transfered i.e 70000 units cost is AED 12,87,300 ( 70000 units * AED 18.39= AED 12,87,300).In the above AED 18.39 is equivalent cost per each completed unit.

Cost of closing work in progress for 10,000 units shall be AED 92,100 ( In the above table value of closing work in progress is calculated for 10,000 units. The above computation is made on the basis of equivalent units i.e 6000 units of materials and 3000 units of conversion costs to arrive at the closing work in process of AED 92,100.

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