(a) Process costing (7 marks) The following information has been gathered from t

Question

(a) Process costing (7 marks)
The following information has been gathered from the production department of the XYZ Company for April. The XYZ production department uses a process costing system and manufactures a pasta sauce which uses two raw material components (RM1 and RM2).
Work in Process at 1 April (85% completed) 6,000
Units started during April 72,000
Completed and transferred to finished goods during April 75,000

Cost In WIP —1 April Current Month
Material - RM1 $14,460 $121,920
Material - RM2 6,510 75,800
Direct Labour 6,000 61,866
Factory overhead 7,500 77,334

Raw material RM1 is introduced at the beginning of the process while RM2 is added at the stage when the product is 60% complete. Conversion costs are incurred at a uniform rate throughout the process. On April 30, Work-in-Process is 35% complete. There were no losses or spoilage during processing.
Using the weighted average cost method, calculate the:
(i) cost per equivalent unit of production
(ii) cost of completed units for the month of April
(iii) closing value of WIP at the end of April.

Explanation / Answer

RM1 RM 2 Conversion cost Opening                           14,460         6,510          13,500 Added:during the year                         121,920       75,800         139,200 Total cost incurred (a)                         136,380       82,310         152,700 Computation of equivalent units Units units units Finished 75000 75000 75000 Closing WIP = 6000+72000-75000 =3000*35% 3000 1050 Therefore equivalent units (b)                           78,000       75,000          76,050 Cost per equivalent unit (a/b)                               1.75           1.10              2.01 b) Cost of completed units of production Amount in $ RM1 =1.75*75000                     131,134.62 RM 2 =1.1*75000                       82,310.00 Conversion cost = 2.01*75000                     150,591.72 Total cost of completed units                     364,036.33 c) Computation of closing value of WIP RM1 =1.75*3000                        5,245.38 RM 2 =0 0 Conversion cost = 2.01*1050                        2,108.28                        7,353.67

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