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) is adjusted to find the correct Factory Cost.
Opening WIP is added because it represents work done last period but completed this period.
Closing WIP is subtracted because it is work started but not finished during this period.

Treatment in the Cost Sheet:
 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

Therefore, the correct Factory Cost after adjusting WIP is ₹ 28,60,000.
This ensures that only the cost of work completed during the period is shown in the cost sheet.