- 20 Marks
Question
a) The following information has been extracted from the records of a company for the half-year ended 31 March 2021. A product, Capital Q, goes through two processes, X and Y:
Details relating to Process X for the period: Input units: 5,000 Finished units transferred to Process Y: 3,200 Closing WIP: 840 Normal losses: 10%
Normal losses have an estimated resale value of GH¢4 per unit.
Costs incurred during the period:
GH¢ | |
---|---|
Direct materials | 31,250 |
Direct labour | 21,200 |
Overheads | 17,325 |
Abnormal Losses and Closing WIP had the following degrees of completion at the end of the period:
Direct materials | Direct labour | Overheads | |
---|---|---|---|
Abnormal Losses | 100% | 80% | 50% |
Closing WIP | 100% | 80% | 50% |
Required: Using the weighted average method: i) Compute the cost per unit for each of the element of costs. (5 marks)
b) Compute the value of the complete units transferred to Process Y. (5 marks)
c) Compute the value of the closing WIP. (5 marks)
d) Prepare Process X Account for the period. (5 marks)
Answer
a) i) Computation of the cost per unit for each element of cost:
Item | Complete Unit | Closing WIP | Abnormal Loss | TEU | Total Cost (GH¢) | Cost/unit (GH¢) |
---|---|---|---|---|---|---|
Materials | 3,200 | 840 | 460 | 4,500 | 29,250 | 6.50 |
Labour | 3,200 | 672 | 368 | 4,240 | 21,200 | 5.00 |
Overheads | 3,200 | 420 | 230 | 3,850 | 17,325 | 4.50 |
Total | 16.00 | |||||
*GH¢29,250 = [31,250 – (GH¢4 x 500)] | ||||||
(5 marks) |
b) Valuation of Complete Units: GH¢16 x 3,200 units = GH¢51,200 (5 marks)
c) Valuation of Closing WIP:
GH¢ | |
---|---|
Materials (840 x GH¢6.50) | 5,460 |
Labour (672 x GH¢5.00) | 3,360 |
Overheads (420 x GH¢4.50) | 1,890 |
Total | 10,710 |
(5 marks) |
d) Process X Account:
Units | Price | Amount (GH¢) | Units | Price | Amount (GH¢) |
---|---|---|---|---|---|
Materials | 5,000 | 31,250 | Normal Loss | 500 | 2,000 |
Labour | 21,200 | Transfer to Y | 3,200 | 51,200 | |
Overheads | 17,325 | Abnormal Loss | 460 | 5,865 | |
WIP c/d | 840 | 10,710 | |||
Total | 5,000 | 69,775 | Total | 5,000 | 69,775 |
(5 marks) |
Valuation of Abnormal Loss:
GH¢ | |
---|---|
Materials (460 x GH¢6.50) | 2,990 |
Labour (368 x GH¢5.00) | 1,840 |
Overheads (230 x GH¢4.50) | 1,035 |
Total | 5,865 |
- Topic: Budgeting, Process Costing
- Series: APR 2022
- Uploader: Joseph