Cost and Management AccountingQuestion 5466 of 251

5. Value of closing WIP

Options

A` 31,096

B` 31,044

C` 30,940

D` 28,340 Case Scenario-II FW Limited manufactures various types of footwear and covers a considerable market share. The footwear made by company are stylish and durable. The management calls for an urgent meeting because it has come to their notice that two of their old permanent customers have moved on to its competitors. Marketing Manager has stated that there are circumstances when company cannot fulfill the demand of their customers due to shortage of supply and this is the main reason for move on. Production Manager has stated that production team is working efficiently but workers have to wait long enough for raw material which leads to idle time and low production. The cost accounts department of FW Limited has furnished the following data for the component B : Purchase Price ` 4,800 per unit Trade Discount 2% of purchase price Total duties (No Credit availed) 8% of purchase price Insurance Charges ` 62,000 per year Units purchased during the year 60,000 units Opening Stock 5,000 units @ ` 5,150 per unit Closing Stock 4,500 units Usages per week Delivery period Minimum 1,050 units Minimum 5 weeks Maximum 1,200 units Maximum 9 weeks Average 1,125 units Average 7 weeks Lead time for emergency purchases is 2 weeks. Additional Information : • Normal wastage during the storage is 80 units (no realizable value) and abnormal wastage is 40 units. • Factory works for 365 days in a year. You are required to calculate the followings (MCQs 6 to 10):

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Correct Answer

✅ Option A — ` 31,096

All Options:

A` 31,096 ✓
B` 31,044
C` 30,940
D` 28,340 Case Scenario-II FW Limited manufactures various types of footwear and covers a considerable market share. The footwear made by company are stylish and durable. The management calls for an urgent meeting because it has come to their notice that two of their old permanent customers have moved on to its competitors. Marketing Manager has stated that there are circumstances when company cannot fulfill the demand of their customers due to shortage of supply and this is the main reason for move on. Production Manager has stated that production team is working efficiently but workers have to wait long enough for raw material which leads to idle time and low production. The cost accounts department of FW Limited has furnished the following data for the component B : Purchase Price ` 4,800 per unit Trade Discount 2% of purchase price Total duties (No Credit availed) 8% of purchase price Insurance Charges ` 62,000 per year Units purchased during the year 60,000 units Opening Stock 5,000 units @ ` 5,150 per unit Closing Stock 4,500 units Usages per week Delivery period Minimum 1,050 units Minimum 5 weeks Maximum 1,200 units Maximum 9 weeks Average 1,125 units Average 7 weeks Lead time for emergency purchases is 2 weeks. Additional Information : • Normal wastage during the storage is 80 units (no realizable value) and abnormal wastage is 40 units. • Factory works for 365 days in a year. You are required to calculate the followings (MCQs 6 to 10):

Detailed Solution & Explanation

The value of closing work-in-progress (WIP) is calculated by summing the material and conversion cost components:

\text{Value of Closing WIP} = \text{₹} 31,096

Hence, **Option A** is the correct answer.

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