Process Costings

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:31AM in AAT student discussion
I am totally confused about this , can anyone explain this to me in simple terms

I am doing a practice sim for unit 6
and the question is
raw materials 1000 tonnes @£70 per tonne
direct labour 475 x 8 per hour
overheads 17500
out put to next process was 940 tonnes
work in progress
60 tonnes
100% complete materials
and 50 % complete labour and over heads


the task is prepare the process account , statement of equivalent units and valuation of work in progress

Now I sort of have done this but i dont get how i got the answer !

Thanks

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Process Costings

    Let me start by saying that this is an unfortunate question because it produces unround answers

    Step 1
    Draw up your T account
    This shows you have 1000 tonnes going into the process and 940 completed and 60 work-in-progress
    And it shows the total cost of £91,300

    Step 2
    Write up an equivalent unit table. Exactly how you do this will depend on the way your teacher showed you (I know the way I show is different from the Osborne Book)
    This should show that the WIP is equivalent to
      60 tonnes of materials
      30 tonnes of labour
    and
      30 tonnes of overhead

    Now you can add these to the finished goods to get the total equivalent output from the materials labour and overhead input.
      Materials: 940 + 60 = 1000
      Labour: 940 + 30 = 970
      Overhead: 940 + 30 = 970

    Step 3
    You can now find the cost per unit in terms of each input
      Materials £70,000/1000 units = £70 per equivalent unit
      Labour £3,800/970 units = £3.917... per eq unit
      Overhead £17,500/970 units = £18.041... per eq unit

    Step 4Find the cost per unit of the finished goods
    Add the input cost per units together:
    £70 + £3.917... + £18.041... = £91.9587..

    This enables you to value the input going into the next process as:
    9,400 x £91.9587... = £86,441.24

    Step 5Value the WIP
    Do this by input and equivalent units in stock
      Materials 60 equ units x £70 = £4,200
      Labour 30 equ units x £3.917... = £117.525..
      Overhead 30 equ units x £18.041..
    Then add them up
      Work in Progress is worth £4,858.763..

    Step 6
    In your T account enter 2 credit entries
      Process 2 £86,441.24
    and
    WIP £4,858.763..[/list]

    Which add up to the £9,300 input

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