Stores pricing and labour cost accounting S. Poynter Public Limited Company, an engineering company constructing special-purpose equipment
Question:
Stores pricing and labour cost accounting S. Poynter Public Limited Company, an engineering company constructing special-purpose equipment to customer specification, employs a system of job costing to determine the actual cost of products manufactured. Shown below is the incomplete stores account, for month 11, of one component used in the construction of the equipment.
Ten of the components issued on 24 November to job 151 were to replace units which had been previously issued to that job but had been damaged and scrapped as a result of incorrect installation.
Required:
(a) Calculate the value of the closing stock of component XYZ using the following methods of pricing material issues:
(i) first in, first out;
(ii) last in, first out.
(b) Using the weighted average method of pricing, calculate the value of the components issued on 24 November. Explain how the ten components issued to replace those previously damaged should be treated in the cost accounts and briefly outline the reasons for your recommended treatment. (Calculations should be to two decimal places only.) (8 marks)
(c) During month 11 the total wages earned by the direct operatives in one department were made up as follows:
Overtime, which is paid at basic time rate plus onehalf, is worked as a means of generally increasing the output of the factory. Analysis of the direct workers’ returned work tickets reveals that 280 hours was non-productive time, 60 hours were spent producing capital equipment for the company, and the remainder of the time was spent on jobs.
Required:
Using appropriate journal entries, show how the above wages should be recorded in the cost accounting system, which is not integrated with the financial accounts. (8 marks)
(Total 22 marks)
ACCA Foundation Costing.LO1
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