BKY Limited produces advanced lubricants. The company uses a process costing system to determine costs for work in progress and finished goods production. At 1 May, there were 250 litres of advanced lubricant work in progress with a value of £1,560. This opening work in progress was 80% complete with respect to all costs incurred in the advanced lubricant production process. During May, 3,000 litres of advanced lubricant were completed and transferred to finished goods. The cost per equivalent unit for costs incurred during May was £8. The company uses the first in first out method to allocate costs to finished goods and closing work in progress. What was the total production cost of the 3,000 units transferred to finished goods in May?

Question

Quizplus · Accepted Answer

The cost of the opening work in progress (250 litres) is £1,560. Since it was 80% complete, the remaining 20% needs to be completed in May, which is 50 equivalent units (250 litres * 20%). The cost for these 50 equivalent units at £8 per unit is £400. The remaining 2,750 litres (3,000 - 250) are completed entirely in May, costing £22,000 (2,750 * £8). Therefore, the total cost is £1,560 + £400 + £22,000 = £23,960.

BKY Limited Produces Advanced Lubricants