CA Intermediate · Cost and Management Accounting · Process & Operation Costing
Gomti Ltd. has Process II opening WIP nil. During the month 4,000 units were introduced, 3,000 were completed and transferred, and 1,000 remain in WIP, 100% complete as to material and 50% complete as to conversion. Costs: material Rs 80,000; conversion Rs 70,000. There are no losses. What is the value of closing WIP?
Material rate is Rs 80,000 over 4,000 equivalent units, which is Rs 20, and conversion rate is Rs 70,000 over 3,500 equivalent units, which is Rs 20. Closing WIP is Rs 20,000 plus Rs 10,000, which is Rs 30,000.
- ARs 40,000
- BRs 35,000
- CRs 37,500
- DRs 42,500Correct
Explanation
Material equivalent units = 3,000 + 1,000 = 4,000, so rate Rs 20. Conversion equivalent units = 3,000 + 500 = 3,500, so rate Rs 20. WIP = 1,000 x 20 + 500 x 20 = 20,000 + 10,000 = Rs 30,000. Stated options do not contain this, so the question is flawed.
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