Question 1

Shah Manufacturing Company engaged in a continuous process, manufacturing a single product which is processed in two departments known as Cleaning and Milling and then transferred to the finished stock. There were no inventories at beginning of December 2021. Following data is available for preparing Cost of Production Report for three departments:

In cleaning, 5% of the units entering the process.

In milling, 10% of the units entering the process.

The scrap value of the wastages in milling process is $16 per 100 units and material lost in cleaning dont have any value.

Cleaning Milling

	$	$
Material consumed	75000	60000
wages	42000	35000
Manufacturing expenses	20000	18000

50,000 units were bought in to process cleaning costing $ 75,000. The outputs were:

Process X	47,500 units
Process Y	41,000 units

1. Prepare Process Cost Accounts showing the cost of the output.

10. arks)

2. Job costing and process costing are used by different types of industries. Discuss the usefulness of these methods with appropriate examples.

6. marks)

3. Explain the treatment of normal and abnormal loss in process costing with example.

6. marks)

4. A business that supplies coal to factories has the following transactions during a period of December. There is no opening inventory.

		Tonnes	Cost per Tonnes
02-Dec	Purchase	5000	10
05-Dec	Purchase	9000	12
		14000
06-Dec	Sold	-7000
10-Dec	Sold	-3000
		4000
Calculate Gross profit and closing inventory using FIFO and LIFO method.

(8 marks)

(Total: 30 marks)