A liquid detergent manufacturing company produces one of its detergent product using two processes, the Chemical Mixing Process, and the Colouring Process. The detergent product is manufactured beginning with the Chemical Mixing Process, and ends with the Colouring Process. Information relating to the Colouring Process for a certain month is as follows:

Opening inventory 7,000 litres:

Degree of completionCost (RM)

Chemical Mixing Process materials100%45,000

Added materials40%5,000

Conversion costs30%15,000

65,000

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During the month, 40,000 litres were transferred from the Chemical Mixing Process at a valuation of RM250,000. Added materials cost RM28,000 and conversion costs were RM85,000.

Closing inventory for the month amounted to 10,000 litres which were 100% complete with respect to the Chemical Mixing Process materials and 60% complete with respect to added materials. Conversion cost work was 40% complete.

The company uses a weighted average cost system for the valuation of output and closing inventory.

Required:

(a) Prepare the following parts of the cost of production report:

(i)A quantity schedule showing the computation of equivalent units and cost per equivalent unit for the month.(10 marks)

(ii)Cost assignments.(4 marks)

(b) Prepare the Colouring Process account for the month.(3 marks)

(c) Explain why the liquid detergent manufacturer uses a Process costing system instead of a Job costing system. (3 marks)

(d)Is it common for a liquid detergent manufacturer to incur normal and abnormal losses in the manufacturing processes? Explain in relation to the liquid detergent manufacturer how normal and abnormal losses can occur and what accounting treatment is necessary.

(5 marks)