At 1 July, AFB Limited's oil refining process had 400 litres of work in progress valued at £8,930. This work in progress was 70% complete with respect to materials and 50% complete with respect to conversion costs. The cost of opening work in progress was made up of £5,978 of materials cost and £2,952 of conversion costs. During the month, 2,500 litres of material were added to the process at a cost of £52,460 for materials and £36,900 for conversion costs. Output from the oil refining process in June was 2,600 litres. Work in progress at 30 June consisted of 300 litres which were 40% complete with respect to materials and 20% complete with respect to conversion costs. AFB Limited uses the first in first out (FIFO) method to value work in progress (WIP) and finished units of output. What is the value of work in progress in the oil refining process at 30 June?

Question

Quizplus · Accepted Answer

The value of work in progress at 30 June can be calculated by considering the costs of materials and conversion costs for the unfinished product. Under the FIFO method, we first complete the opening work in progress (WIP) before using the materials and conversion costs added during the month. The calculation involves determining the costs needed to complete the opening WIP and adding the costs for the new WIP at the end of the month. The correct calculation leads to a value of £3,480 for the work in progress at 30 June.

At 1 July, AFB Limited's Oil Refining Process Had 400