Unit 6 - Work in Progress & Process Accounts

haighston
haighston Registered Posts: 2 New contributor ?
Hi,

Anyone able to help with the following?

The process comprises of 3 stages: grinding, mixing & packing.

The information for the month is...
Inputs into grinding cost centre are:
Raw materials 1000 tonnes @ £70/tonne
Direct Labour 475 hours @ £8/hour
Process Overheads £17500

Outputs from grinding transfered to mixinng stage 940 tonnes
W.I.P 60 tonnes which is 100% complete materials, 50% complete labour & overhead.

Can you draft the process account for grinding for the month and value the W.I.P?

So far im having little success at matching any sort of answer i get to the answer booklet!

INPUT
Materials - 1000 units - £70000
Labour - £3800
Overheads - £17500


Any help is appreciated...Thanks :thumbup:

Comments

  • visha
    visha Registered Posts: 218 ? ? ?
    This is the question on Equivalent Unit, to work out how much is the work in progress on the shop floor is worth.
    To understand equivalent unit concept:
    Suppose that you have 2 children and you have 3 bars of Cadbury chocolate. 1 bar a whole= 100% 2nd bar is ¾ = 75% and the 3rd bar is a ¼= 25%
    How will you share the 3 bars of chocolate equally among your
    Answer 1+3/4+1/4 = 2 divide by 2 = 1 whole bar of chocolate each.
    Therefore one child will receive 1 whole bar while the other child will receive 2 partial bars.

    Similarly
    …………………………………………units …………………Materials………………Labour………….Overheads
    ………………………………………………………………………………………………….485 hrs @£8 p/hr
    Does not sound right……………………………………………………………………………………………..£17,500
    ………………………….....…………………………………………./Units…………………..Units………………….Units
    Total..................................1000……………….…£70,000…………..……£3,880……………..£17,460
    % completed Units.……….....……940..……100%.......940 units….100%...940 unit...100%....940 units
    % partial Equivalent units….....60..………100%........60 Units……50%......30 units…50%......30units
    Total Equivalent units……………...……………...…………1000 Units……………..970units…………..970units
    Cost per Equivalent unit………………………...………...£70.00…………………...£4.00..................£18.00
    Fully completed unit costs…-940 units………...…..£65800………………...£3,760…………………£16,920 (86,480)
    w-i-p- costs………………………..…60 units………...…….£4200.(30 units)……..£120…(30 units)…..£540 (£4,860)
    Total………………………………………………………....……..£70,000…………………..£3,880…………………£17,460 (91,340)
  • SandyHood
    SandyHood Registered, Moderator Posts: 2,034
    I agree with Visha
    I had the benefit of a spreadsheet so I was able to use unrounded cost per equivalent unit figures, but I have a question.

    I saw the line with
    Does not sound right
    Is that why your total costs for labour and overheads are different from the first posting at £3880 rather than £3800 labour
    and £17,460 rather than £17,500 overhead?
    Sandy
    [email protected]
    www.sandyhood.com
  • visha
    visha Registered Posts: 218 ? ? ?
    if you divide (475*8) 3800= labour BY 970- the cost per unit comes to £3.92

    and £17500 overheads by 970 it comes to £18.04

    My experience has been that the examples in the text books or generally in the exam papers, the cost of the units will be either a whole number or with a sensible decimal number such as £0.75 or £0.25

    if the charge had been £4.00 per unit then the costs would have been £3880 or 485 hrs at £8

    similarly the overhead charge of £18 per unit comes to £17460
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