ExpertHard2 marksShort Answer
ACCA · Question 14 · Cost accounting techniques
Section A
ChemCo operates a chemical refinery using process costing. During the month, 10,000 liters of material were input. Normal loss is 5% of input.
Actual output completed and transferred was 8,500 liters. Closing Work in Progress (WIP) was 1,000 liters, which were 100% complete for materials and 60% complete for conversion costs.
Calculate the equivalent units for conversion costs for the period.
(Enter your answer as a whole number)
Section A
ChemCo operates a chemical refinery using process costing. During the month, 10,000 liters of material were input. Normal loss is 5% of input.
Actual output completed and transferred was 8,500 liters. Closing Work in Progress (WIP) was 1,000 liters, which were 100% complete for materials and 60% complete for conversion costs.
Calculate the equivalent units for conversion costs for the period.
(Enter your answer as a whole number)
How to approach this question
1. Check for abnormal loss: Input (10,000) - Normal Loss (500) = Expected Output (9,500). Actual Output (8,500) + WIP (1,000) = 9,500. There is no abnormal loss/gain.
2. Calculate EU for conversion: Completed units (8,500 * 100%) + WIP units (1,000 * 60%).
Full Answer
Input = 10,000 liters. Normal loss = 5% of 10,000 = 500 liters. Expected good production = 9,500 liters.
Actual completed = 8,500. Closing WIP = 1,000. Total accounted for = 9,500. Therefore, no abnormal loss or gain.
Equivalent units for conversion costs:
Completed units: 8,500 × 100% = 8,500
Closing WIP: 1,000 × 60% = 600
Total equivalent units for conversion = 8,500 + 600 = 9,100.
Common mistakes
Including normal loss in the equivalent units calculation, or using 100% for the WIP conversion costs.
Practice the full ACCA MA — Management Accounting Practice Exam 6
38 questions · hints · full answers · grading
More questions from this exam
Q01**Section A**
Global Wildlife Trust, an international NGO, is deciding whether to expand its con...EasyQ02**Section A**
CloudSync, a rapidly growing SaaS tech startup, monitors the daily server uptime a...EasyQ03**Section A**
AgriGrow operates a network of automated hydroponic farms. The management accounta...MediumQ04**Section A**
A municipal water treatment plant utilizes both financial accounting and managemen...EasyQ05**Section A**
In a boutique consulting firm, management relies heavily on quantitative variance ...Medium