Question 1

A chemical processing plant uses the FIFO (First-In, First-Out) method for process costing. At the start of the month, there were 2,000 units in opening work-in-progress (WIP), which were 60% complete with respect to conversion costs.

During the month, 8,000 units were started and completed. Closing WIP was 1,500 units, 40% complete with respect to conversion costs.

What are the equivalent units for conversion costs for the month under the FIFO method?

Accepted Answer

Under FIFO, equivalent units = (Opening WIP * % needed to complete) + Units started and completed + (Closing WIP * % complete).

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using the weighted average method (10,600 units) or multiplying opening WIP by the 60% already completed instead of the 40% remaining.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 5

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