Question 2

Nola Apparels Limited produces fashionable clothes for all ages through two processes; cutting and assembly materials undergo these processes in cutting and assembly departments. At the beginning of August 2020, the cutting process has opening WIP of 200 units at $8 102 and its breakdown was:

Degree of completion $

Materials 100% 4 950

Labour 30% 968

Overheads 20% 2 184

Total 8 102

In August 2020, 1 000 units of materials were added to the cutting process. Due to limitations of the cutting machine, 10% of materials added to the cutting process were expected to become loss with a scrap value of $10 per unit. It is the companys cost accounting policy to deduct the scrap value of normal losses from the cost of materials in the current process. By end of August, 940 units of finished cutting process were transferred out to the next process: assembly. 100 units remained in closing WIP and their degrees of completion of individual inputs were:

Materials 100%

Labour 60%

Overheads 40%

Costs incurred in August were:

Materials $20 700

Labour $5 074

Overheads $10 920

REQUIRED:
Prepare the process report for August 2020 using the weighted average method showing the following:
2.1	Quantity statement (inclusive of equivalent units)
2.2	Production cost statement per unit
2.3	Cost allocation statement
2.4	Journal entries to record: (i) Raw materials requisitioned by cutting department (ii) Items transferred from cutting department.
2.5	Cutting Process account