Question 1
The Mitchell Construction Company uses a process-cost system. Materials are added at the beginning of a particular process and conversion costs are incurred uniformly. The following data relates to February 2017:
Opening work in progress 400 units
Units started during the month 5,200 units
Closing work in progress 150 units
Cost of materials in April €31,980
Conversion costs in April €21,580
Cost of materials, opening work in progress €2,740
Conversion costs, opening work in progress €640
The opening work in progress is fully complete regarding materials and 40% complete regarding conversion costs.
The closing work in progress is fully complete regarding materials and 70% complete regarding conversion costs.
No units were lost in the production process in February 2017
Required:
Prepare a cost-of-production report for February 2017, indicating the cost of finished goods and the cost of closing work in progress using the following two methods:
(a) The first-in-first-out method (FIFO); and
(b) The weighted-average method.
Question 2
Jumco Limited, which uses process costing, manufactures a single product which passes through two processes, the output of process 1 becoming the input of process 2.
Normal losses and abnormal loss are defective units having a scrap value and cash is received at the end of the period for all such units. The following information relates to a four-week period:
18,000 units of raw material were issued to process 1 at a cost of €5.00 per unit. There was no opening or closing work in progress but opening and closing stocks of finished goods were €30,000 and €35,000 respectively.
Process 1 Process 2
Normal loss as a percentage of input 4.50% 6.00%
Output in units 17,150 16,150
Scrap value per unit – € 2.00 6.00
Direct wages incurred – € 15,000 25,000
Additional components – € 10,140 11,176
Production overhead as a percentage of
Direct wages 80% 45%
Required
Present the accounts for the following:
Process 1
Process 2
Finished goods
Normal loss
Abnormal loss
Abnormal gain
Question 3
BKC Limited produces three joint products in one common process but each product is capable of being further processed separately after the split-off point. The estimated data given below relate to January 2017:
Product B Product K Product C
€ € €
Selling price at
the split-off point 10 18 20
Selling price
after further processing 20 30 45
Post separation point costs 33,000 35,000 42,300
Output in Litres 7,000 5,000 4,000
Pre-separation point joint costs are estimated to be €60,000 and it is current practice to apportion these costs to the three products according to litres produced.
Required:
Prepare a statement of estimated profit or loss for each product and in total for January 2017 if all three products are processed further.
Advise how profit could be maximised if one or more products are sold at the split-off point. Your advice should be supported by a profit statement.
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