Question 3 (30 marks)

KS Chemicals manufactures and sells liquid soap in western Jamaica. The company uses a process costing system where all materials to produce the liquid soap are added at the start of the production process. The opening inventory of a process is 25,000 units which are deemed 80% completed with respect to direct labour and overheads. Opening material cost is $1,000,000, while direct labour and production overheads are $800,000 and $ 1,100,000 respectively. During the period 75,000 units were started. Material cost for the period was $1,500,000. Meanwhile, direct labour and production overheads incurred were $1,900,000 and $1,600,000 respectively. It was ascertained that there were 20,000 units at the end of the period which are 50% complete for labour and production overheads. Management also indicated that resources are used evenly over the production process. Required:

a) Using the weighted average cost flow assumption: determine the equivalent unit cost for direct material and conversion cost. (10 marks)

b) Prepare the process account using the weighted average. Hint: the account should include units and values. (5 marks)

c) Using the FIFO cost flow assumption: determine the equivalent unit cost for direct material and conversion cost. (10 marks)

d) Prepare the process account using the FIFO. Hint: the account should include units and values. (5 marks)