Page 161 - Microsoft Word - 00 ACCA F2 Prelims.docx

Process costing

Tomy Ltd makes perfume. Production requires several successive
processes and the production details of the first process are as follows:

Volume started in period 3,600 litres

Closing work in process 1,000 litres

Degree of completion of closing WIP:
Materials 100%
Conversion 65%

Costs incurred in April:
Materials $4,860

Conversion $7,800

Step 1 – balance the units

Volume started = Output + CWIP

3,600 = 2,600 + 1,000

Step 2 – calculate the EU for each element of cost

EU

Materials – Completed 2,600 × 100% 2,600
– CWIP 1,000 × 100% 1,000

–––––
3,600

–––––
Conversion – Completed 2,600 × 100% 2,600
– CWIP 1,000 × 65% 650

–––––

3,250
–––––

Step 3 – calculate the total costs for each element of cost

Materials = $4,860

Conversion = $7,800

Note – conversion is the combination of labour and overhead costs

155