Question

A chemical compound is made by raw material being processed through two processes. The output of
Process A is passed to Process B where further material is added to the mix. The details of the process
costs for the financial period number 10 were as shown below:

Process A
Direct material 2000 kilograms at 5 per kg
Direct labour shs7200
Process plant time 140 hours at shs60 per hour

Process B
Direct material 1400 kilograms at shs12 per kg
Direct labour shs4200
Process plant time 80 hours at shs72.50 per hour

The departmental overhead for Period 10 was shs6840 and is absorbed into the costs of each process on
direct labour cost.

Process A Process B
Expected output was 80% of input 90% of input
Actual output was 1400 kg 2620 kg

Assume no finished stock at the beginning of the period and no work in progress at either the beginning
or the end of the period. Normal loss is contaminated material which is sold as scrap for shs0.50 per kg
from Process A and shs1.825 per kg from Process B, for both of which immediate payment is received.

You are required to prepare the accounts for Period 10, for
a) Process A,
b) Process B,
c) Normal loss/gain,
d) Abnormal loss/gain,
e) Finished goods,
f) Profit and loss (extract).

Question
A firm operates a process, the details of which for the period were as follows. There was no opening
work-in-progress. During the period 8250 units were received from the previous process at a value of
shs453 750, labour and overheads were shs350 060 and material introduced was shs24 750. At the end
of the period the closing work-in-progress was 1600 units, which were 100% complete in respect of
materials, and 60% complete in respect of labour and overheads. The balance of units was transferred
to finished goods.
Requirements:
a) Calculate the number of equivalent units produced.
b) Calculate the cost per equivalent unit.
c) Prepare the process account.
d) Distinguish between joint products and by-products, and briefly explain the difference in
accounting treatment between them.
Question
A company manufactures a product that requires two separate processes for its completion. Output
from Process 1 is immediately input to Process 2.
The following information is available for Process 2 for a period:
(i) Opening work-in-progress units:
12 000 units: 90% complete as to materials, 50% complete as to conversion costs.
Opening work-in-progress value:
Process 1 output: shs13 440
(ii) Process 2 materials added: shs4970
Conversion costs: shs3120.
(iii) Costs incurred during the period:
Process 1 output: shs107 790 (95 000 units)
Process 2 materials added: shs44 000
Conversion costs: shs51 480.
(iv) Closing work-in-progress units
10 000 units: 90% complete as to materials, 70% complete as to conversion costs.
(v) The product is inspected when it is complete. 200 units of finished product were rejected during
the period, in line with the normal allowance. Units rejected have no disposal value.

Required:
a) Calculate the unit cost of production for the period in Process 2 (to three decimal places of shs),
using the periodic weighted average method.
b) Prepare the Process 2 Account for the period using the unit cost of production calculated in (a)
above. Explain why, and how, the Process 2 Account would be different if there was no normal
allowance for rejects. NB The process account should not be reworked.
c) Explain how the process account workings, required in (a) above to calculate the unit cost,
would differ if the FIFO valuation method was used instead.

Question
Chemical Processors manufacture Wonderchem using two processes, mixing and distillation. The
following details relate to the distillation process for a period
No opening work in progress (WIP)
Input from mixing 36 000 kg at a cost of shs166 000
Labour for period shs43 800
Overheads for period shs29 200
Closing WIP of 8000 kg, which was 100% complete for materials and 50% complete for labour and
overheads.
The normal loss in distillation is 10% of fully complete production. Actual loss in the period was 3600 kg,
fully complete, which were scrapped.

Required:
(a) Calculate whether there was a normal or abnormal loss or abnormal gain for the period.
(b) Prepare the distillation process account for the period, showing clearly weights and values. (10
marks)
(c) Explain what changes would be required in the accounts if the scrapped production had a resale
value, and give the accounting entries

Question
 (a) Z Ltd manufactures metal cans for use in the food processing industry. The metal is introduced
in sheet form at the start of the process. Normal wastage in the form of offcuts is 2% of input.
The offcuts can be sold for shs0.26 per kilo.
Each metal sheet weighs 2 kilos and is expected to yield 80 cans. In addition to wastage through
offcuts, 1% of cans manufactured are expected to be rejected. These rejects can also be sold at
shs0.26 per kilo.
Productions, and costs incurred, in the month just completed, were as follows:
Production: 3 100 760 cans
Costs incurred:
Direct materials: 39 300 metal sheets at shs2.50 per sheet
Direct labour and overhead: shs33 087
There was no opening or closing work in process.

Required:
Prepare the process accounts for the can manufacturing operation for the month just
completed.

(b) Another of the manufacturing operations of Z Ltd involves the continuous processing of raw
materials with the result that, at the end of any period, there are partly completed units of
product remaining.
Required:
With reference to the general situation outlined above
(i) Explain the concept of equivalent units

(ii) Describe, and contrast, the FIFO and average methods of work in process valuation.

Question
The manufacture of one of the products of A Ltd requires three separate processes. In the last of the
three processes, costs, production and stock for the month just ended were:
(1) Transfers from Process 2: 180 000 units at a cost of shs394 200.
(2) Process 3 costs: materials shs110 520, conversion costs shs76 506.
(3) Work in process at the beginning of the month: 20 000 units at a cost of shs55 160 (based on
FIFO pricing method). Units were 70% complete for materials, and 40% complete for conversion
costs.
(4) Work in process at the end of the month: 18 000 units which were 90% complete for materials,
and 70% complete for conversion costs.
(5) Product is inspected when it is complete. Normally no losses are expected but during the month
60 units were rejected and sold for shs1.50 per unit.
Required:
(i) Prepare the Process 3 account for the month just ended.
(ii) Explain how, and why, your calculations would be affected if the 60 units lost were treated as
normal losses.
(iii) Explain how your calculations would be affected by the use of weighted average pricing instead
of FIFO.

Question
A company operates several production processes involving the mixing of ingredients to produce bulk
animal feedstuffs. One such product is mixed in two separate process operations. The information below
is of the costs incurred in, and output from, Process 2 during the period just completed.

Costs incurred: shs

Production: Units
Opening work in process 1 200
(100% complete, apart from Process 2
conversion costs which were 50% complete)
Transfers from Process 1 112 000
Completed output 105 400
Closing work in process 1 600
(100% complete, apart from Process 2
conversion costs which were 75% complete)

Normal wastage of materials (including product transferred from Process 1), which occurs in the early
stages of Process 2 (after all materials have been added), is expected to be 5% of input. Process 2
conversion costs are all apportioned to units of good output. Wastage materials have no saleable value.
Required:
a) Prepare the Process 2 account for the period, using FIFO principles.
b) Explain how, and why, your calculations would have been different if wastage occurred at the
end of the process.