LOSSES IN PROCESS (WEIGHTED AVERAGE)

a company uses a process costing system in which the following terms arise: conversion cost work in progress equivalent units normal loss abnormal loss.

required:

a. provide a definition of each of these terms. b. explain how you would treat normal and abnormal losses in process costs accounts. c. one of the products manufactured by the company passes through two separate process. in each process losses occur arising from rejected material. In process 1, normal losses are 20% of input. in process 2, normal losses are 10% of input.the losses arise at the end of each of the processes. reject material can be sold. process 1 reject material can be sold for R1.20 per kilo and process 2 reject material for R1.42 per kilo. information for a period is as follows:

process 1: material input 9000 kilos, cost R14964 direct labour R12250 production overhead R2450 material output 7.300 kilos

process 2: material input 7.300 kilos direct labour R5000 production overhead R1300 material output 4700 kilos

at the end of the period 2000 kilos of material were incomplete in process 2. these were 50% complete as regards direct labour and production overhead. there was no opening work in progress in either process, and no closing work in progress in process 1.

required: prepare the relevant cost accounts for the period.