At 1 March, TFP Limited had 2,000 litres of liquid fertiliser that were 60% complete with respect to all inputs of material, labour and overhead. This opening work in progress (WIP) was valued at £5,692. During March, 20,000 litres of material were input to the process. Total costs for March for materials, labour and overhead amounted to £82,500. During the month 20,000 litres of liquid fertiliser were transferred to finished goods. Work in progress (WIP) at the end of the month amounted to 2,000 litres which were 40% complete with respect to materials, labour and overhead. TFP Limited values output and work in progress (WIP) from its liquid fertiliser process using the weighted average cost valuation method. What is the value of closing work in progress (WIP) using the weighted average cost method at the end of March?

Question

Quizplus · Accepted Answer

To calculate the value of closing WIP using the weighted average cost method, we first determine the total cost of inputs (opening WIP + costs added during the month) and then divide this by the total equivalent units to find the cost per equivalent unit. Finally, we multiply the cost per equivalent unit by the equivalent units in closing WIP.1. Total costs = Opening WIP (£5,692) + Costs added during March (£82,500) = £88,192.2. Total units processed = Opening WIP (2,000 litres, 60% complete) + Units added (20,000 litres) = 22,000 litres. However, for costing purposes, we need to calculate equivalent units.3. Equivalent units = Units completed and transferred out (20,000 litres at 100%) + Closing WIP (2,000 litres at 40%).   - For the opening WIP, since it's 60% complete, it's already accounted for in the previous period's costs.   - Therefore, equivalent units for March = 20,000 + (2,000 * 40%) = 20,800.4. Cost per equivalent unit = Total costs / Equivalent units = £88,192 / 20,800 = £4.24 per litre.5. Value of closing WIP = Closing WIP litres * Completion percentage * Cost per equivalent unit = 2,000 * 40% * £4.24 = £3,392.Therefore, the value of the closing work in progress using the weighted average cost method at the end of March is £3,392.

At 1 March, TFP Limited Had 2,000 Litres of Liquid