Sagar Limited, an oil refinery uses Process Costing for determining the cost of each process. Management of Sagar Limited is confused about method…

Sagar Limited, an oil refinery uses Process Costing for determining the cost of each process. Management of Sagar Limited is confused about method of valuation of WIP. They have FIFO and Weighted Average Cost methods under consideration. Finance manager Mr. Sahil has put forward that Weighted Average Cost method is suitable when there are significant fluctuations in price and quantity. In this method, calculation has to be done at every purchase and it is a complex and time-consuming method. He also stated that price and quantity of input and output material of Sagar Limited is almost same for whole year; hence FIFO method would be more suitable for the company. He also revealed that in oil refinery industry; FIFO method is preferred over Weighted Average Cost method and switching to FIFO method will save time and money. He further stated that by using FIFO method closing WIP is valued at current cost and provided the following information: Opening WIP : 12,000 Units, Total cost - 1,66,200. Degree of Completion : Material 100%Labour and Overhead- 80% Material introduced: (74,500 Units) ₹ 4,76,465 Direct Labour - 3,70,395 Direct Overhead - 2,96,316 Units Scrapped : 1,900 units Degree of Completion : Material 100%Labour and Overhead 70% Closing WIP : 2,600 units Degree of Completion: Material 100%Labour and Overhead 60% Rest of the units were transferred to next process. Normal Loss is 2% of total input unit including opening work-in-process. Realizable value of normal loss is 2 per unit deducted from cost of material introduced. You are required to calculate the following using FIFO method (MCQs 1 to 5) :