CA Intermediate · Cost and Management Accounting · Process & Operation Costing
Process P received 2,000 units and has no opening WIP. Closing WIP is 400 units, 100% complete for material and 50% complete for conversion. Units completed 1,600. Material cost Rs 2,00,000 and conversion cost Rs 1,12,000. What is the value of closing WIP?
Closing WIP is valued by computing equivalent units separately for material and conversion, deriving a rate for each, and applying them to the closing WIP's completion levels.
- ARs 60,000
- BRs 72,000
- CRs 76,000Correct
- DRs 80,000
Explanation
Material equivalent units = 1,600 + 400 = 2,000; rate = 100. Conversion equivalent units = 1,600 + 200 = 1,800; rate = 1,12,000/1,800 = 62.22. Closing WIP = 400 x 100 + 200 x 62.22 = 40,000 + 12,444 = Rs 52,444, which matches no option, so the item is flawed.
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