ECONOMICS

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COST ACCOUNTING

PROCESS COSTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
REFER TO QUESTION 8Kayu Cengal Sdn Bhd has 20, 000 units in beginning work in process including the cost of material is RM15, 000 and conversion costs is RM8, 000.30, 000 units transferred out to finished goods, and 6, 000 units in ending work in process 30% complete as to conversion costs.The beginning and ending inventory is fully complete as to materials costs. Cost incurred for the month is RM28, 200 for material and RM 17, 440 for conversion costs.The value of finished goods and ending work in process costs are, respectively:
A
RM30, 000; RM9, 400
B
RM25, 000; RM8, 640
C
RM30, 000; RM8, 640
D
RM25, 000; RM9, 400
Explanation: 

Detailed explanation-1: -The first-in-first-out (FIFO) method keeps beginning inventory costs separate from current period costs and assumes that beginning inventory units are completed and transferred out before the units started during the current period are completed and transferred out.

Detailed explanation-2: -Equivalent units for a process costing system using the FIFO method would be equal to: a. units completed during the period, plus equivalent units in the ending work in process inventory.

Detailed explanation-3: -To calculate cost per equivalent unit by taking the total costs (both beginning work in process and costs added this period) and divide by the total equivalent units.

Detailed explanation-4: -To calculate cost per equivalent unit, sum the beginning work in process inventory costs and the costs added in the period, then divide by the number of units.

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