Equivalent production and losses in process A concentrated liquid fertilizer is manufactured by passing chemicals through two consecutive processes. Stores record cards for the chemical ingredients used exclusively by the first process show the following data for May:

Opening stock 4000 litres £10800 Closing stock 8000 litres £24 200 Receipts into store 20000 litres £61 000

~ Other process data for May is tabulated below:

In Process 1 the closing stock of work in process has just passed through inspection, which is at the stage where materials and conversion costs are 100 per cent and 75 per cent completed respectively.
In Process 2 inspection is the final operation.
Required:

(a) Prepare the relevant accounts to show the results of the processes for May and present a detailed working paper showing your calculations and any assumptions in arriving at the data shown in those accounts.
(18 marks)

(b) If supplies of the required chemicals are severely restricted and all production can be sold immediately, briefly explain how you would calculate the total loss to the company if, at the beginning of June, 100 litres of the correct mix of chemicals were spilt on issue to process 1.
(4 marks)
ACCA Foundation Costing

Transcribed Image Text:

Direct labour Direct expenses Overhead absorption rates Output Opening stock of work in process Closing stock of work in process Normal yield Scrap value of loss Process 1 4880 4270 250 per cent of direct labour 8000 litres 5600 litres 85 per cent of input Process 2 6000 - 100 per cent of direct labour 7500 litres 90 per cent of input