Intermediate: Losses in process (weighted average)

A company manufactures a product that goes through two processes. You are given the following cost information about the processes for the month of November.

You are told:
(1) The closing WIP in Process 1 was 80% complete for material, 50% complete for labour and 40% complete for overhead.
(2) The opening WIP in Process 2 was 40% complete for labour and 50% complete for overhead. It had a value of labour £3200, overheads £6000 for work done in Process 2.
(3) The closing WIP in Process 2 was two-thirds complete for labour and 75% complete for overhead.
(4) No further material needed to be added to the units transferred from Process 1.
(5) Normal loss is budgeted at 5% of total input in Process 1 and Process 2. Total input is to be inclusive of any opening WIP.
(6) Normal loss has no scrap value in Process 1 and can be sold for the input value from Process 1, in Process 2.
(7) Abnormal losses have no sales value.
(8) It is company policy to value opening WIP in a process by the weighted average method.

Required:

(a) Prepare accounts for:
(i) Process 1.
(ii) Process 2.
(iii) Normal loss.
(iv) Any abnormal loss/gain. (19 marks)

(b) Compare and contrast a joint product with a by-product.

Transcribed Image Text:

Process 1 Process 2 Unit input 15 000 Finished unit input 10000 from Process 1 Finished unit output 10 000 to Process 2 Finished unit output 9500 from Process 2 Opening WIP - Units Input - Materials - Labour - Overhead 2000 - - Value 26200 26 740 36 150 40000 40 635 59 700 Closing WIP - Units 4400 1800