COSTING METHODS (Cost and Management Accounting)

QUESTION 1 : JOB COSTING

A company operates a job costing system. Job number 6789 will require $345 of direct materials and $210 of direct labour, which is paid $14 per hour.

Production overheads are absorbed at the rate of $30 per direct labour hour and non-production overheads are absorbed at the rate of 40% of prime cost.

Required

What is the total expected cost of the job?

QUESTION 2 : PROCESS COSTING

XYZ Ltd Chemical Ltd processes a range of products including a detergent, 'Washo', which passes through 3 processes before completion and transfer to the finished goods warehouse. During April, data relating to this product were as follows:

Process I

Process II

Process III

Total

Basic raw material (10,000 units)

$6,000

-

-

$6,000

Direct raw material added in process

$8,500

$9,500

$5,500

$23,500

Direct wages

$4,000

$6,000

$12,000

$22,000

Direct expenses

$1,200

$930

$1,340

$3,470

Production overhead

-

-

-

$16,500

Output (in Units)

9,200

8,700

7,900

Normal loss in process of input (per cent)

10%

5%

10%

Scrap value sales per unit

$0.20

$0.50

$1.00

The production overhead is absorbed as a percentage of direct wages. There was no stock at the start or at the end of any process.

Required:

You are required to prepare the following accounts:

i)Process I,

ii)Process II

iii)Process III,

iv)Abnormal gain/loss

QUESTION 3 : PROCESS COSTING

A factory operates two processes. Output from Process 1 is transferred as input to Process 2. Output from Process 2 is the finished product. Data for the two processes in June 2018 are as follows:

Process 1

Opening work in process

Nil

Units introduced into the process

14,000u

Units completed and transferred to Process 2

10,000u

Closing work-in-progress units

4,000u

Material cost added during the period

$70,000

Conversion cost added during the period

$48,000

Materials are input into Process 1 at the start of the process and conversion costs are incurred at a constant rate throughout processing. The closing work-in-progress in Process 1 at the end of June 18 is estimated to be 50% complete for the conversion work.

Process 2

Opening work-in-process

Nil

Units transferred into the process from Process 1

10,000u

Closing work-in-progress units

1,000u

Units completed and transferred to finished goods inventory

9,000u

Costs for the period:

Cost of production transferred from Process 1

$90,000

Conversion cost added during the period

$57,000

Added materials during Process 2

$36,000

The materials from Process 1 are introduced at the start of processing in Process 2, but the added materials are introduced at the end of the process. Conversion costs are incurred at a constant rate throughout processing. The closing work-in-progress in Process 2 at the end of June 2018 is estimated to be 50% complete.

REQUIRED:

a)Using FIFO method of valuation, calculate the following:-

i)Unit cost of production for each material and conversion costs, for Process 1 and Process 2 separately.

ii)Calculate the total costs for each material and conversion costs, for Process 1 and Process 2 separately.

b)Prepare the Process 1 and Process 2 accounts for June 2018.