Question: Smooth as Silk Ltd is a yoghurt manufacturer which uses process costing.
At the beginning of September Smooth as Silk Ltd has opening inventory of 500 units which are 60% complete and cost £2,800.
Costs incurred in the period are: £ Material (2,500 units) 13,200 Labour 6,600 Production overheads 6,600 26,400.
Closing inventory is 300 units which are 80% complete.
Smooth as Silk Ltd use FIFO to value inventory.
Required:
a) Calculate the cost per equivalent unit for the period.
b) Prepare the process account for the period.
c) Explain which other method of inventory valuation may be appropriate and how it may differ from FIFO.