Shown below is the previous month's operating data for process 3, the final manfacturing operation in the

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Shown below is the previous month's operating data for process 3, the final manfacturing operation in the production of standard sized insulation blocks.

Work-in-process:

Opening stock 400 blocks, total cost £1000 Closing stock 500 blocks The degree of completion of both opening and closing stocks of work 1n process was:

Previous process costs 1 00 %

Process 3 materials 80%

Conversion costs 60%

During the month 4500 blocks were transferred from process 2 at a total cost of £9000. Other costs charged to process 3 during the month were:

Materials £4360 Labour and overhead £2125 Process inspection occurs when process 3 materials are 60 %

complete and conversion costs 30 % complete and normally no losses are expected at this stage. However during the month 300 blocks were rejected at inspection and sold as scrap for £1 each.

The company operates the first-in, fi rst-out method of charging opening stock to production .

Required ·

(a) Prepare the process 3 account and an abnormal loss account recording the data shown above. Include a detailed working paper showing all your calculations .
(17 marks)

(b) Explain the reasons for valuing stocks of work in process .

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