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(2) A company operates several production processes involving the mixing of ingredients to produce bulk animal feedstuffs. One such product is mixed in two
(2) A company operates several production processes involving the mixing of ingredients to produce bulk animal feedstuffs. One such product is mixed in two separate process operations. The information below is of the costs incurred in, and output from, Process 2 during the period just completed. Transfers from Process 1 Raw materials costs Conversion costs Costs incurred: K 187 704 47 972 63 176 DUE DATE: TUESDAY 15/08/23 10:00 HOURS Opening work in process Production: Units Opening work in process Transfers from Process 1 Completed output Closing work in process 3 009 1 200 (100% complete, apart from Process 2 conversion costs which were 50% complete) 112 000 105 400 1 600 (100% complete, apart from Process 2 conversion costs which were 75% complete) Normal wastage of materials (including product transferred from Process 1), which occurs in the early stages of Process 2 (after all materials have been added), is expected to be 5% of input. Process 2 conversion costs are all apportioned to units of good output. Wastage materials have no saleable value. Required: (a) Prepare the Process 2 account for the period, using FIFO principles. (11 marks) (b) Explain how, and why, your calculations would have been different if wastage occurred at the end of the process. (3 marks)
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