Question 2: Process Costing Shiraz LTD is a medical production company which has recently decided to add the production of COVDD 19 testing kit to its production lines. Kit Components includes the following items: Test cassettes Droppers Package inserts Buffer bottle The company's production processes are split into two separate departments. The Designing Department produces basic Test cassettes which can be used for different testing kits such as SARS, Mad Cow diseases and COVID 19. The Finishing Department receives the Test cassettes packages from the Designing Department as 'Transferred In' and starts working on them by adding fiuther materials (at the beginning), direct labour and overhead (evenly) and adding a Buffer bottle (at 95% level of completion) to each kit and then transferring them out. So, the 'Transferred in' items received form the Designing Department include: Test cassettes. Droppers, Package inserts but not Buffer bottles. Overhead cost in the Finishing Department is calculated based on 50% of direct labour costs. Currently, there are two quality inspections performed. The first inspection is carried out at the begging of the process to make sure that the Test cassettes received from the Designing departments meet the specifications for COVDD 19 testing kits. Kits not passing the inspection at this stage will be returned to the Designing Department and the total cost of those will be deducted from 'Transferred In costs. The second quality inspection is carried out at 90% level of completion and spoilages up to 5% of units passed the inspection will be considered as normal. Spoilages units at this stage will be send back to the Designing Department for a recovery cost of $0.50 each. It means that the Designing Department gives a credit of 50 cents to the Finishing Department for every spoilage, which is specified at 90% level of completion in the Finishing Department The following information is available for the month of April in the Finishing Department: Direct Labour Costs (5) The following information is available for the month of April in the Finishing Department: Physical units Direct Transfer Buffer Conversion Materials (S) in Costs bottles (5) Costs (5) ($) WIP (April 1st) 2,721 5,938 3,133 2.883 % of completion of Opening WIP 60% Transferred in during April 26,755 Good units completed and transferred out in April 21,404 WIP (April 30th) 2,671 % of completion of Ending WIP 30% Total costs added during April 41,208 6,074 4,091 Normal spoilage rate 5% Transferred in to be returned (faulty) 4% at the beginning Recovery sale value per unit $0.50 33,123 5 Required: Prepare a full process cost reports (inchiding all five steps) for the Finishing Department for the month of April by using the weighted average method. Use the actual numbers (with all decimal places) for all calculations but round the final answers to a full unit with no decimal places when you are answering the questions online on Canvas, except for unit prices for each cost item It means only use 4 decimal places for unit costs of the direct labour cost, material cost, Transfer in cost, Buffer Butter and full cost (per unit). Your report must answer the following questions: 1 1 1 3 Questions Marks 1. How much are the total units account for. 2. How much is the total units of normal spoilages at 90% level of completion? 3. How much is the total units of abnormal spoilages at 90% level of completion? 4. How much are the total equivalent units for materials for the period? 5. How much are the total equivalent units for 'Transferred In for the period? 6. How much are the total equivalent units for Buffer bottles for the period? 7. How much are the total equivalent units for conversion costs for the period? 8. How much are the total costs account for. 9. How much is the total cost account for' for the material costs for the period? 10. How much is the total cost account for' for 'Transferred In costs for the period? 11. How much is the total cost account for for Buffer bottles' costs for the period? 12. How much is the total cost account for for the conversion costs for the period? 13. How much is the total recovery costs for returning normal spoilages at 90% 14. How much is the total recovery costs for returning abnormal spoilages at 90% 15. How much is the cost per unit for the material costs for the period? 16. How much is the cost per unit' for 'Transferred In costs for the period? 3 17. How much is the cost per unit' for Buffer bottles' costs for the period? 18. How much is the "cost per unit for the conversion costs for the period? 19. How much is the total costs of completed units before adding the costs of normal spoilage? 20. How much is the total costs of completed units after adding the costs of normal spoilage? 21. How much are the total costs of abnormal spoilage? 22. How much are the total costs of ending inventories? 23. How much are the total costs of one testing kit competed and transferred out during the month? 24. How much are the total costs accounted for 25. How much are the total units accounted for. Total marks for the question Please answer all above question on Canvas (under Assignment 2) Points to consider: You need to calculate the net transferred in units and their related costs at the first inspection point before you start the first stage of process costing. Conversion costs equal direct labour costs plus overhead costs. So, you need to calculate the conversion costs for the period if it is not given. 3 3 4 7 4 4 3 1
