Intermediate: Integrated cost accounting NB Limited operates an integrated accounting system. At the beginning of October, the following balances appeared in the trial balance:

Plant and equipment is depreciated at the rate of 20% per annum, using the straight-line basis. Production overhead is absorbed on the basis of direct wages cost.
You are required

(a) to ascertain and state the production overhead absorption rates used for Process 1 and for Process 2; (2 marks)

(b) to write up the ledger accounts; (25 marks)

(c) to explain the nature of abnormal losses and two possible reasons for their occurrence.

Transcribed Image Text:

Freehold buildings Plant and equipment, at cost Provision for depreciation on plant and equipment Stocks: (000) (000) (000) 800 480 100 10 Raw materials 400 Work in Process 1: direct materials 71 direct wages 50 production overhead 125 246 Work in Process 2: direct materials 127 direct wages 70 production overhead 105 302 Finished goods 60 Debtors 1120 Capital 2200 Profit retained 220 Creditors Bank 300 464 Sales Cost of sales Abnormal loss absorbed 1200 888 9 Production overhead under/over 21