Industrial Solvents Limited mixes together three chemicals - A, B and C - in the ratio 3:2:1 to produce Allklean, a specialized anti-static fluid. The chemicals cost £8, £6 and £3.90 per litre respectively.
In a period, 12 000 litres in total were input to the mixing process. The normal process loss is 5 per cent of input and in the period there was an abnormal loss of 100 liters whilst the completed Production was 9500 liters.
There was no opening work in progress (WIP) and the closing WIP was 100 per cent complete for materials and 40 per cent complete for labour and overheads. Labour and overheads were £41 280 in total for the period. Materials lost in production are scrapped.
Required:
(a) Calculate the volume of closing WIP. (3 marks)
(b) Prepare the mixing process account for the period, showing clearly volumes and values. (9 marks)
(c) Briefly explain what changes would be necessary in your account if an abnormal gain were achieved in a period.