## ACCA, F2

ranjanharsh74
Posts: 1
Joined: Wed Jun 22, 2016 5:15 am

### ACCA, F2

I have a doubt in EXAMPLE 3, PROCESS COSTING chapter. Please explain me this question again.

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

### Re: ACCA, F2

Example-3 Starts with The following information...............Weighted average cost method.

Firstly, we need to determine the physical flow of the units.

Calculate it with FIFO method and then with WAC method.

Opening WIP (500) + Units Received (4500) = Units completed (4400) + Closing WIP (600)

In FIFO 4400 are completed units which include 500 units as opening WIP so it is equal to 3900 units.

In WAC it's 4400 units (because in WAC it is assumed that opening WIP is "merged" with units introduced in the current period.)

FIFO

Now we need to calculate Effective units

Opening WIP is 80% and 40% complete as regards materials and labour & overhead respectively so equivalent units will be 20% and 60% of 500 i.e. 100 units and 300 units
.
4500-600 = 3900 finished units

Equivalent units for closing WIP is 100%, 70% and 20% of 600 i.e 600,420 and 120.

Now total cost would be 243,000 (4500*54) + 287,300 + 367,200 = 897,500

CPEU= Cost/EU
So total CPEU=204
Material=65

Now working will be done for Put & Processed, Opening WIP and Closing WIP on the basis of the above data.

Now you will be able to prepare process account (FIFO)

Let's come to WAC method

The only difference in WAC method is in the calculation of Opening WIP, Put & processed and Closing WIP units.

Calculation will be the same all you need to understand is that while using Weighted average method you don't need to find EU in opening WIP.

The only calculation is for put & processed (4400 units) and closing WIP (600 units)

Good Luck