Question text

Pepsin Inc. produces canned sodas by processing its raw material through two processes. The output of Process A is passed to Process B where further material is added to the mix. You have been provided with the following information, which relates to Process B for August 2021:

Opening work-in-process:

23,400 units at a value of $625,365

Transfer of materials from Process A: $339,300 100% complete

Added materials: $114,777 90% complete

Conversion costs: $171,288 60%

$625,365

Costs incurred during August 2021:

Transfer of materials from Process B: $1,030,950

Added materials: $ 385,533

Conversion cost: $ 882,792

$2,299,275

During August 2021, 81,000 units were transferred to finished stock.

Closing work-in-process:

13,500 units were in process at 31 August 2021 of which materials transferred from Process A was 100% complete, added materials 80% complete, and the conversion cost 40% complete.

Required:

(a) Using the first-in, first-out (FIFO) method of pricing for valuing opening work-in process, calculate the equivalent cost per unit for each element of cost. (19 marks)

(b) Prepare the Process B account for August 2021. (3 marks)

(c) Outline THREE differences between job order costing and process costing. (3 marks)

(d) Distinguish between normal and abnormal losses and explain how their accounting treatment differs. (4 marks)