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AS 2 valuation of inventories

(Guest)

Can anyone help me wid this?

calculate d value of closing WIP by using FIFO & weighted avg method..

WIP(opening) degree of completion

1000 units

Raw material 100% Rs.5000

Wages 40% RS.2000

overhead 20% RS.1000

Fresh inputs 10000 units Rs.60000

wages Rs. 70000

overhead Rs.40000

closing WIP

1000 units

raw material 100%

wages 60%

overhead 30%

output 9900 units, normal loss 100 units

Ans should be :

FIFO 11418 WA 11282

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13 Replies

SACHIN KUMAR GARG (Final Student) (105 Points)
Replied 27 March 2010

FIFO		10963.3
Mat	LAB	OV
60000/10900*1000	70000/11100*600	40000/11000*300
5504.6	3783.8	1090.9	10379.3

WA
Mat	LAB	OV
65000/10900*1000	72000/11100*600	41000/11000*300
5963.3	3891.9	1118.2	10973.4

1 Like

Payal Gupta (article assistant) (176 Points)
Replied 04 April 2010

sachin bro is right

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 04 April 2010

Valuation under FIFO method:

Per Unit Cost = expenses / weighted no. of unit produced

Weighted no. of unit produced;

for material = 10000

for wages = 600 (completed out of op. WIP) + 10000 - 400 (remained to be completed in cl. WIP) = 10200

for overheads = 800 + 10000 - 700 = 10100

valuation of overhead:

Material in cl. WIP = 60000/10000*1000 = 6000

Wages in cl. WIP = 70000/10200*600 = 4118

Overhead in cl. WIP = 40000/10100*300 = 1188

total value of cl. WIP = 11306.

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 04 April 2010

Valuation under weighted average method:

Per Unit Cost = total expenses / weighted no. of total unit produced

Weighted no. of total unit produced;

for material = 1000 + 10000 - 100 = 10900

for wages = 1000 + 10000 - 400 (remained to be completed in cl. WIP) -100 = 10500

for overheads = 1000 + 10000 - 700 -100= 10200

valuation of overhead:

Material in cl. WIP = 65000/10900*1000 = 5963

Wages in cl. WIP = 72000/10500*600 = 4114

Overhead in cl. WIP = 41000/10200*300 = 1206

total value of cl. WIP = 11283 (or say 11282)

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 04 April 2010

RECTIFICATION IN THE SOLUTION AS I DID NOT CONSIDERED NORMAL LOSS OF 100 UNIT.

Valuation under FIFO method:

Per Unit Cost = expenses / weighted no. of unit produced

Weighted no. of unit produced;

for material = 10000 - 100 = 9900

for wages = 600 (completed out of op. WIP) + 10000 - 400 (remained to be completed in cl. WIP) -100 = 10100

for overheads = 800 + 10000 - 700 -100 = 10000

valuation of overhead:

Material in cl. WIP = 60000/9900*1000 = 6060

Wages in cl. WIP = 70000/10100*600 = 4158

Overhead in cl. WIP = 40000/10000*300 = 1200

total value of cl. WIP = 11418.

SACHIN KUMAR GARG (Final Student) (105 Points)
Replied 05 April 2010

Hi Anshu

As per ur calculation u didn't considared Normal Loss and Closing Stock in weighted no. of unit produced

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 05 April 2010

I have considered it, please check...

moreover answer is also tallied.

SUDHIR & PRADEEP JI (CA FINAL+LLB + DISA) (2299 Points)
Replied 06 April 2010

FIFO		10963.3
Mat	LAB	OV
60000/10900*1000	70000/11100*600	40000/11000*300
5504.6	3783.8	1090.9	10379.3

WA
Mat	LAB	OV
65000/10900*1000	72000/11100*600	41000/11000*300
5963.3	3891.9	1118.2	10973.4

SACHIN KUMAR GARG (Final Student) (105 Points)
Replied 06 April 2010

given answer is not always right

CA Anshu Agarwal (B€ @LW@¥$ ]-[@Pp¥) (1832 Points)
Replied 08 April 2010

Originally posted by : SACHIN KUMAR GARG
	FIFO 10963.3 Mat LAB OV 60000/109001000 70000/11100600 40000/11000300 5504.6 3783.8 1090.9 10379.3 WA Mat LAB OV 65000/109001000 72000/11100600 41000/11000300 5963.3 3891.9 1118.2 10973.4

can u tell me the followings:-

in case of FIFO method:

why u have included 1000 units of opeing WIP, in calculating Materail cost per unit? only 10000 units produced in current period less normal loss should be considered. (i.e. 10000-100 = 9900)

same in case of wages and overheads.

in case of weighted average method:

for wages: why u have considered 1000 units (some portion comleted in preceding period and some in current period) and also 600 units (portion incomlete out of preceding period in current year)? so u considered 600 units twice, i.e. included in 1000 units and 600 separately also.

same in case of overhead.

pls check the same.

SACHIN KUMAR GARG (Final Student) (105 Points)
Replied 08 April 2010

Hi Anshu

yes ur right, i have done mistake in my calculation

chaman (ARTICLE) (30 Points)
Replied 21 September 2018

NORMAL CAPACITY PRODUCTION 50000 UNITS PER YEAR AND PRODUCTION OVER HEAD FOR YEAR 350000 COST OF CONVERSION 10 LACS . UNITS REMAIN CLOSED FOR 2 MONTHS DUE TO LATE ORDER RECD.

1 FIND CLOSING STOCK VALUE FOR 6000 UNITS IF UNIT IDLE IS DUE TO NORMAL ANS 162000

2 VALUE OF 6000 UNITS IF UNIT CLOSING IS DUE TO ABNORMAL ANS 155000