Question

(4), (5) You are given the following information concerning inventory movements in a firm for April as recorded in the General Ledger. [Note: You may perform calculations below. Workings in your answer book are not required for these parts.] RAW MATERIALS 7,000 1/4 Opening Balance Creditors (-Purchases) 1/5 Balance c/d (next month) Work in Progress 30/4 Closing Balance 12.000 12,000 WORK IN PROGRESS 1/4 Opening Balance Raw materials Direct Labour Overhead Applied 1/5 Balance c/d (next month) Finished Goods 24,000 30/4 Closing Balance 21,000 25.000 24,000 FINISHED GOODS 1/4 Opening Stock Work in Progress 1/5 Balance c/d (next month) Cost of goods Sold Closing Balance 110,000 20,000 30/4 20,000 COST OF GOODS SOLD 110.000 Finished Goods P&L Account 110.000 You are also told: (a)Closing Work in Progress is three times larger than Opening work in Progress. (b)Overhead is applied to Work in Progress at 150% of Direct Material Cost. Required: What was the value of purchases in April? (4) What was the value of goods transferred from WiP to Finished Goods? (5)

Answer 1

Answers:

Value of Purchases during April ( as per working note 3) = 55000

Value of goods transferred from WIP to finished goods ( as per working note 1 ) = 130000

Working Note 1: Calculation of goods transferred from WIP to Finished goods

Finished Goods Account

Particulars	Amount	Particulars	Amount
Opening Stock	0	Cost of goods sold	110000
Work in Progress(balancing figure)	130000	Closing Stock	20000
Total	130000	Total	130000

Working Note 2: Calculation of Raw material used in Work in Progress

Work in Progress Account

Particulars	Amount	Particulars	Amount
Opening Stock (Closing Stock=3*Opening Stock Opening Stock=24000/3)	8000	Finished Goods (as per working note 1)	130000
Raw Materials (Overheads=150%of Material Cost Material Cost=75000/150%)	50000	Closing Balance	24000
Direct Labour	21000
Overhead Applied	75000
Total(balancing figure)	154000	Total(balancing figure)	154000

Working Note 3:Calculation of Value of Purchases during April

Raw Materials Account

Particulars	Amount	Particulars	Amount
Opening Stock	7000	Work in Progress (working note 2)	50000
Creditors(Purchases) (Balancing figure)	55000	Closing Stock	12000
Total	62000	Total	62000