Intermediate: Accounting entries for a standard process costing system A firm produces a plastic feedstock using a process form of manufacture. The firm operates in an industry w here the market price fluctuates and the firm adjusts output levels, period by period in an attempt to maximise profit which is its objective. Standard costing is used in the factory and the following information is available.

Process 2 receives input from process 1 and after processing, transfers the output to finished goods. For a given period the opening work-in- process for process 2 was 600 barrels which had the following values:

During the period 3700 barrels were received from process 1 and at the end of the period the closing work-in-progress was at the following stages of completion:

where Q represents the number of barrels.
You are required to

(a) determine the theoretical production level which will maximize profit; (6 marks)

(b) prepare the process 2 account assuming that the calculated production level is achieved;
(7 marks)

(c) prepare the accounts for process 2 material, labour and overhead showing clearly the variance in each account.

Transcribed Image Text:

Percentage Value complete () Input material (from process 1) 3000 100 Process 2 material introduced Process 2 labour Process 2 overhead 6000 50 1.800 30 2.700 30 13.500