QUESTION 2 The following information relates to Ngweze Manufacturers CC, a close
ID: 2404530 • Letter: Q
Question
QUESTION 2 The following information relates to Ngweze Manufacturers CC, a close corporation that manufactures a single product and uses a process costing system. Inventory is valued on the FIFO method 25 MARKS The process is such that all materials are added at the beginning of the process and conversion costs are incurred evenly throughout the process. Units are inspected when the process is 80% complete and losses normally amount to 20% of the good units Below is information pertaining to the month of February 2017 Opening work in progress Units-40% complete Material costs Conversion costs 7 000 R90 000 R45 000 Costs for February 2011 Material costs Conversion costs R860 000 R518 880 Production for February 2011 Units placed into production Units completed and transferred Work in progress-75% complete 43 000 32 000 7 200 Page 9 of 12 REQUIRED 2.1 Compute the cost per equivalent unit of production. (12) 2.2 Compute the value of finished goods, work in progress and abnormal losses (in applicable) (13)Explanation / Answer
Working notes:
Particulars
Input units
Particulars
Output units
Equivalent % of work done during Feb
Equivalent units
Opening WIP
7,000
Completed (given) (Good units)
32,000
100%
32,000
Units introduced in Feb
43,000
Normal Loss @20% of good units
(32,000 x 20%)
6,400
-
-
Closing WIP (given)
7,200
75%
5,400
Abnormal Loss (balancing figure)
4,400
100
4,400
50,000
50,000
41,800 units
Question 2.1:Calculation of equivalent cost per unit-
Total cost incurred during the Feb = R860,000 + R518,800 = R1,378,800
Total Number of equivalent units = 41,800 units
Cost per equivalent unit = 1,378,800 41,800 = 32.98
Question 2.2
Value of Finished goods = 32,000 x 32.98 = R1,055,360
Value of WIP = 5,400 x 32.98 = R178,092
Value of abnormal loss = 4,400 x 32.98 = R145,112
(WIP = Work In progress)
Hope this is useful and thank u!!!!!!
Particulars
Input units
Particulars
Output units
Equivalent % of work done during Feb
Equivalent units
Opening WIP
7,000
Completed (given) (Good units)
32,000
100%
32,000
Units introduced in Feb
43,000
Normal Loss @20% of good units
(32,000 x 20%)
6,400
-
-
Closing WIP (given)
7,200
75%
5,400
Abnormal Loss (balancing figure)
4,400
100
4,400
50,000
50,000
41,800 units