Grantha of Cost & FM

Rules for process Costing

5.       The units of abnormal gain will be reduced in output column & also in equivalent unit column. Always remember that the DOC of Abnormal Gain units are 100%.

6.       Application of FIFO method for WIP inventory valuation

Ø  While preparing statement of Equivalent production assume that the opening WIP units will be computed first by doing the remaining work.

Ø  While computing the value of closing stock/WIP it will be assumed that opening WIP units have been completed first & closing WIP units are out of current inputs.

7.       Application of Weighted Average Method in WIP inventory Valuation

ü  Merge the units of opening WIP with current input completely ignoring the DOC of opening WIP.

ü  While computing cost per equivalent units, merge the cost of opening WIP with current cost.

8.       When to apply FIFO & W.Avg. Method

Method

FIFO :-  % of completion is given in respect of “Opening WIP”


W.Avg. :- When individual cost element of M, L, and O/H is given in respect of “ Op. WIP “