Question 1 (10 marks)

Suppose that input to a process is 1,000 units at a cost of 4,500. Normal loss is 10% and there is no opening or closing stock. Determine the accounting entries for the cost of output and the cost of the loss if actual output were as follows:

a)860 units (5 marks)

b)920 units (5 marks)

*** You need to complete the process accounts as well as any other accounts that are needed for the full completion of the transactions.

Question 2 (30 marks)

Three joint products are manufactured in a common process, which consists of two consecutive stages. Output from process 1 is transferred to process 2, and output from process 2 consists of the three joint products; A, B and C. All joint products are sold as soon as they are produced.

Information for Period 2 of 2016 is as follows.

Process 1 Process 2

Opening and closing inventory None None

Direct material

(20,000 units at 2 per unit) 40,000

Conversion costs 79,000 76,500

Normal loss 10% of input 10% of input

Scrap value of normal loss 1 per unit 2 per unit

Output 17,000 units 7,000 units of A

6,000 units of B

2,100 units of C

Selling prices are 18 per unit of A, 20 per unit of B and 30 per unit of C.

Required

a)Prepare the Process 1 account. (10 marks)

b)Prepare the Process 2 account using the sales value method of apportionment. (15 marks)

c)Prepare all other necessary accounts (Abnormal loss, Abnormal Gain, Scrap Value)

(5 marks)

Question 3 (15 marks)

Neon Limited is a manufacturing/production company. On 1 June 2016, there was one uncompleted job in its factory. The job card for this work is summarized as follows.

Job Card, Job No A10

Costs to date

Direct materials 650

Direct labour (120 hours) 360

Factory overhead (2 per direct labour hour) 240

Factory cost to date 1,250

During June 2016, three new jobs were started in the factory, and costs of production were as follows.

Direct materials

Issued to:

Job A10 2,510

Job A11 1,610

Job A12 4,150

Job A13 4,390

Direct labour hours recorded

Job A10430 hrs

Job A11650 hrs

Job A12280 hrs

Job A13410 hrs

The cost of labour hours during June 2016 was 3 per hour, and production overhead is absorbed at the rate of 2 per direct labour hour.

Completed jobs were delivered to customers as soon as they were completed, and the invoiced amounts were as follows.

Job A10 6,000

Job A12 8,100

Job A13 7,400

Administration and marketing overheads are added to the cost of sales at the rate of 20% of factory cost.

Required

a)Prepare the job accounts for each individual job during June 2016; (the accounts should only show the cost of production, and not the full cost of sale). (10 marks)

b)Prepare the summarized job cost cards for each job, and calculate the profit on each completed job. (5 marks)

Question 4 (15 marks)

ZETA manufactures two products, A and B, which use the same raw materials, Y and Z. One unit of A uses 3 liters of Y and 4 kilograms of Z. One unit of B uses 5 liters of Y and 2 kilograms of Z. A liter of Y costs 3 and a kilogram of Z 7.

Budgeted sales for 2018 are 8,000 of A and 6,000 of B. Finished goods at the beginning of 2018 were 1,300 units of A and 400 units of B and the company plans to hold inventories of 600 units of each product at the end of 2018.

Inventories of raw materials are 6,000 liters of Y and 2,800 kilograms of Z at the beginning of the year and the company plans to hold 5,000 liters of Y and 3,500 kilograms of Z at the end of the year.

The warehouse and store managers have suggested that a provision should be made for damages and deterioration of items held in store as follows:

Product A: loss 70 unitsmaterial Y: loss 500 liters

Product B: loss 400 unitsmaterial Z: loss 200 kilogram

Required

Prepare a materials budget for 2018.

Question 5 (10 marks)

Below is information in relation to the accounts of A FACTORY LIMITED.

Direct materials (1/1)25.000

Purchases made during the year115.000

Direct materials (31/12)15.000

Direct labor used during the year60.000

Direct labor paid during the year56.000

Direct labor liability (31/12)4.000

Manufacturing Overhead during the year85.000

Work in Progress (1/1)27.000

Work in Progress (31/12)22.000

Finished goods (1/1)44.000

Finished goods (31/12)39.000

You are required to calculate the amount of Cost of Sales for the year.

*** Please show ALL of your workings as well as all relevant accounts with the above said amounts.

Question 6 (20 marks)

Nationalic makes one product, product A. Two types of labor are involved to produce product A; skilled and semi-skilled labor. The cost of skilled labor is 9 per hour and for semi-skilled is 6 per hour. To produce one unit of A, you need 4 hours of semi-skilled labor and 8 hours of skilled labor.

Product A is made up of three different direct materials, as follow:

TypeQuantityCost

Material X7 kilograms1

Material Y5 liters1

Material Z3 meters3

Variable overheads are charged at the rate of 2.50, per direct labor skilled hours.

A system of absorption costing is used is used by Geomatic. The basis is the direct labor skilled hours. For the coming accounting period, budgeted fixed costs are 100.000 and the budgeted production in units is 5,000.

Administration expenses are added to the cost of the product at the rate of 10 per unit.

A mark up of 25% is made for A.

Required

Prepare a standard cost card for product A.