AB Chemicals Limited produces a compound by mixing certain ingredients within two separate processes. For a particular week the recorded costs were:

Discarded materials have scrap values of £0.30 per kilogramme from Process 1 and £1.50 per kilogramme from Process 2. Assume that sales of scrap are made for cash during the week.

There was no work-in-progress at either the beginning or end of the week.

Output during the week was 1400 kilogrammes from Process 1 and 4200 kilogrammes from Process 2.

You are required to:

(a) Show the accounts for:

(0 Process 1

(ii) Process 2

(iii) abnormal gain loss (iv) profit and loss - relating to transactions in any of the above accounts (v) finished goods

(b) Explain, in relation to process costing, the concept of 'equivalent units' and give a simple example using your own figures.

Transcribed Image Text:

Process 1 Material: 2000 kilogrammes at 2 per kilogramme Labour: 360 Process plant time: 24 hours at 200 per hour Process 2 Material: 3100 kilogrammes at 6 per kilogramme Labour: 240 Process plant time: 40 hours at 76.30 per hour. Indirect production overhead for the week amounted to 2,400 and is absorbed on the basis of labour cost. Normal outputs are: Process 1 80% of input Process 2 90% of input