Question 3(29 marks)

Tulipamwe Windhoek ("TW") operates a process costing system to manufacture honey. The company buys raw honey from the farmers concentrated in the Zambezi region of Namibia. The process involves extracting raw-honey and filtering it to remove all forms of impurities (e.g. wax and bee stingers). The final product known as the "HoneyDew" is packaged into 500 grams (g) containers and sold to the local market.

Raw honey is the only direct material required for the process. Raw honey required for the HoneyDew is added at the beginning of the process. Conversion costs are incurred evenly throughout the process.

A normal loss is detected at inspection point which occurs when the process is 70% complete. The normal loss is 5% of the input raw honey that reaches this point. All losses in the process are sold at N$2 per kilo. One (1) kilo of the raw-honey adjusted for losses and/or gains yields one (1) kilogram of HoneyDew.

Page 13 of 16

The following information relates to the process for the month ended 31 August 2020:Details Notes Quantity Amount

Sales - HoneyDew 1 ?? N$783 250 Opening inventory of finished goods (HoneyDew)150 units N$?? Closing inventory of finished goods (HoneyDew)?? units N$??

Opening work-in-progress (WIP) - 60% complete 2 1 200 kg N$64 800 Closing WIP - 80% complete750 kg N$?? Raw-honey put into production in the current period 3 5 800 kg N$331 300 Direct labour costs: current period 3N$56 920 Production overheads: current period 3N$60 000

Notes:

1. HoneyDew was sold at N$65 per unit in the month of August 2020. 2. N$10 800 of the opening WIP value relates to the conversion costs and the balance thereof relates to the raw-honey costs. 3. TW completed and transferred 6 000 kilograms during the month.

Requirement Marks

3.1 Prepare the actual quantity statement for TW for the month of August 2020. 10 3.2 Calculate TW's actual closing finished goods value as it would have appeared in the profit statement for the month of August 2020.17

3.3 Briefly contrast the treatment of a normal loss value to that of an abnormal loss value in the profit statement applying process costing principles.

Ignore the implications of scrap value(s).

2

N.B. Where applicable show all workings. Round off your workings and final answer to two decimal places.