Process Costing

Royal Paints (U) Ltd produces a paint called Weather Guard, which passes through three processes A, B, and C. during May 2022. The following took place during the production processes.

Process A-data

10,000kgs of materials were put into the production process and each Kg was valued at Shs.6,000

Direct labour of 8,000 labour hours were used and each hour was valued at Shs. 3,000

Actual output turned out to be 8500 units while process loss was scrapped at Shs. 6,000 per unit and was paid for by cheque.

Process B-data

3000kgs of materials were added to the production process and each Kg was valued at Shs. 7,000.

Direct labour amounted to Shs. 14,000,000

Actual output was 11,000 units and the process loss was scrapped at Shs. 8,000 per unit.

Process C- data

Additional materials totaling 1,000kgs valued at Shs. 5,000 per kg were introduced in the production process.

Direct labour amounted to shs. 12,000,000

Actual output was 11,500 units while process loss was scrapped at Shs. 9,000 per unit.

Additional information

Overheads were absorbed at 120% of direct labour in each process.

Normal loss was expected to be 8%, 6% and 3% respectively for process A, B and C

All process losses were scrapped and properly paid for.

Required;

Prepare the process accounts for this paint.

Assuming you are a management accountant of Royal paints U Ltd, cite out situations that would warrant for process costing.