Losses in process (weighted average method) and decision-making based on relevant costs ABC ple manufactures processed foods in two successive processes.

During April 2000, ABC ple produced a total output of 4570kgs of maize-meal from its final process, which it can sell for £6.50 per kg.

Details relating to each of the two processes are as follows:

All materials are added at the start of processing and all losses are completely processed.

(b) MZ Limited has offered ABC ple a temporary contract to purchase all output from process |
at a price of £4.40 per kg.
Advise ABC ple whether it should accept the offer, assuming that costs in April 2000 are representative of future costs, and that process 2 costs are 70% variable. Include in your advice the additional factors which should be considered, and which are not included in the process account calculations you have produced in answer to part (a).(/0 marks)

(c) Distinguish between joint products and byproducts.
Explain their accounting treatment.

Transcribed Image Text:

Process 1 Process 2 Opening work in process 500 kgs 200 kgs Valued at: Previous process cost n/a 360 Materials 500 n/a Conversion cost 520 105 Raw materials input 10000 kgs n/a costing Conversion cost Closing work in process Normal waste as a % of input raw materials or of previoius process transfers Output (40% processed) (70% processed) 5500 6.500 7400 800 kgs 150 kgs 30% 15% 6800 kgs 4570 kgs