Intermediate: Discussion question on methods of apportioning joint costs and the preparation of process accounts with all output fully completed

(a) ‘Whilst the ascertainment of product costs could be said to be one of the objectives of cost accounting, where joint products are produced and joint costs incurred, the total cost computed for the product may depend upon the method selected for the apportion¬ ment ofjoint costs, thus making it difficult for management to make decisions about the future of products.’

You are required to discuss the above state¬ ment and to state two different methods of apportioning joint costs to joint products.

(8 marks)

(b) A company using process costing manufac¬ tures a single product which passes through two processes, the output of process 1 becom¬ ing the input to process 2. Normal losses and abnormal losses are defective units having a scrap value and cash is received at the end of the period for all such units. The following information relates to the four-week period of accounting period number 7.

Raw material issued to process 1 was 3000 units at a cost of £5 per unit.

There was no opening or closing work-in- progress but opening and closing stocks of finished goods were £20 000 and £23 000 respectively.

Transcribed Image Text:

Process Process 1 2 Normal loss as a 10% 5% percentage of input Output in units 2800 2600 Scrap value per unit 2 5 Additional components 1000 780 Direct wages incurred 4000 6000 Direct expenses incurred 10000 14000 Production overhead as a percentage of direct wages 75% 125%