QUESTION 2 (20 MARKS, 36 MINUTES) House & Home (HH") manufactures a single model of a commercial prefabricated wooden cabinet. The basic cabinet components are cut out of wood in the cutting department and then transferred to the assembly department. Materials are added at the beginning of the process in both departments. Conversion costs are incurred evenly throughout the departments. Normal wastage incurred in the cutting department amounts to 4% of the units that reach the wastage point, and arise at the end of the process. The following information applies to the assembly department for September 2021: Opening inventory of work in progress (20% completed) te ci Units introduced Units transferred to assembly department Closing inventory of work in progress (90% completed) Units 70 000 150 000 180 000 20 000 Opening Material Conversion Cost (NS) 325 000 128 000 Cost incurred in current period: Material Conversion 560 000 1 800 000 Page 2 of 7 REQUIRED: MARKS 17 1.5 2.1. Prepare the process cost report for the cutting department using the FIFO method. (Show all your workings, and where possible, round off your final answers to two decimal places) 2.2 In what way is process costing differ from a job costing system? 2.3. Clearly explain whether you would agree with the following statements: "Normal loss is controllable; hence it is shown as a separate lino item in the company's financial statements. On the other hand, abnormal loss is uncontrollable, thus it is allocated to other accounts TOTAL MARKS 1.5 20 QUESTION 2 (20 MARKS, 36 MINUTES) House & Home (HH") manufactures a single model of a commercial prefabricated wooden cabinet. The basic cabinet components are cut out of wood in the cutting department and then transferred to the assembly department. Materials are added at the beginning of the process in both departments. Conversion costs are incurred evenly throughout the departments. Normal wastage incurred in the cutting department amounts to 4% of the units that reach the wastage point, and arise at the end of the process. The following information applies to the assembly department for September 2021: Opening inventory of work in progress (20% completed) te ci Units introduced Units transferred to assembly department Closing inventory of work in progress (90% completed) Units 70 000 150 000 180 000 20 000 Opening Material Conversion Cost (NS) 325 000 128 000 Cost incurred in current period: Material Conversion 560 000 1 800 000 Page 2 of 7 REQUIRED: MARKS 17 1.5 2.1. Prepare the process cost report for the cutting department using the FIFO method. (Show all your workings, and where possible, round off your final answers to two decimal places) 2.2 In what way is process costing differ from a job costing system? 2.3. Clearly explain whether you would agree with the following statements: "Normal loss is controllable; hence it is shown as a separate lino item in the company's financial statements. On the other hand, abnormal loss is uncontrollable, thus it is allocated to other accounts TOTAL MARKS 1.5 20
