Question

Show the treatment of Work-in-Progress in the cost sheet from the given information:

Prime Cost          ₹ 20,00,000
Factory Overheads         ₹ 8,00,000
Opening WIP          ₹ 2,00,000
Closing WIP          ₹ 1,40,000

Hint:

Opening WIP is added, closing WIP is subtracted in the cost sheet.

Answer 1

In a cost sheet, Work-in-Progress (WIP) adjustments are made to determine the accurate Factory Cost. Opening WIP is added as it signifies work from the previous period finalized in the current one. Closing WIP is subtracted as it represents work commenced but not finished within the current period.

Cost Sheet Treatment:
 Prime Cost: ₹ 20,00,000
 Add: Factory Overheads: ₹ 8,00,000
 Gross Works Cost: ₹ 28,00,000

 Add: Opening WIP: ₹ 2,00,000
 Sub-Total: ₹ 30,00,000

 Less: Closing WIP: ₹ 1,40,000
 Factory Cost: ₹ 28,60,000

Consequently, the Factory Cost, adjusted for WIP, amounts to ₹ 28,60,000.
This calculation ensures the cost sheet reflects solely the expenses incurred for work completed within the reporting period.