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Chapter 9
8.1 Weighted average (AVCO)
Reed Ltd is a soft drinks manufacturer. The details of a process in
Period 2 are as follows:
Physical litres Material Conversion
OWIP 300 100% complete 75% complete
Costs in OWIP $19,000 $3,500
Completed output 2,000
Costs in Period 2 $80,000 $70,000
CWIP 200 100% complete 50% complete
There was no CWIP
Calculate the value of the completed output and closing work in progress
using the AVCO technique
Physical units Materials Conversion
Step 1: EU % EU % EU
Completed 2,000 100 2,000 100 2,000
CWIP 200 100 200 50 100
Total 2,200 2,200 2,100
Step 2: Costs $ $
OWIP 19,000 3,500
Period 80,000 70,000
Total 99,000 73,500
Step 3: Cost per EU 45 35
Step 4 – value the outputs
Completed units = 2,000 × ($45 + $35) = $160,000
CWIP units = (200 × $45) + (100 × $35) = $12,500
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