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 in the oil refining process at 30 June is £3,480. This is calculated as follows:Opening work in progress:Materials cost: £5,978 x 70% = £4,185Conversion costs: £2,952 x 50% = £1,476Total opening work in progress: £4,185 + £1,476 = £5,661Work in progress added during the month:Materials cost: £52,460Conversion costs: £36,900Total work in progress added during the month: £52,460 + £36,900 = £89,360Total work in progress: £5,661 + £89,360 = £95,021Closing work in progress:Materials cost: £89,360 x 40% = £35,744Conversion costs: £89,360 x 20% = £17,872Total closing work in progress: £35,744 + £17,872 = £53,616Therefore, the value of work in progress in the oil refining process at 30 June is £53,616.

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