TUTORIAL 5 (30 MARKS) AGRIFARM is a company that operates several production processes by converting raw materials into bulk animal feed. Animal feed is the food given to domestic animals in the course of animal husbandry. AGRIFARM buys the raw materials of animal feed and blends them in the feed mill according to the specifications outlined by the food standards agency. The traditional sources of animal feed raw materials include household food scraps and the by-products of food processing industries such as milling and brewing. Animal feed plays an important part in the food chain and has implications for the composition and quality of the livestock products (e.g. milk, meat and eggs) that people consume. Therefore, there is little room for error in the manufacture of animal feed. Set out below is the information for AGRIFARM for the month of July 2015. This information pertains to Process 2 in the production of animal feed. Notes R 1 187 704 47 972 ? 1 Costs incurred: Transfers from Process 1 Raw material costs Conversion costs Opening work-in-progress Process 1 Raw material Conversion costs 3 009 938 2 050 2 Production: Opening work-in-progress Transfers from Process 1 Raw material inputs Completed output Closing work-in-progress Wastage Kilogram (kg) 1 200 112 000 26 800 130 000 1 600 3 Notes: 1. Conversion costs consist of labour and production overheads. Production overheads are absorbed at 200% of direct labour. AGRIFARM remunerates its production workers using the premium bonus scheme and its administrative employees using the guaranteed hourly rate. With regards to the premium bonus scheme, the bonus (based on 75% of time saved) is added to pay calculated on an hourly basis. The time allowed for each kg of animal feed is three minutes. During the month of July, employees worked as follows: Rate per Hours worked 5 700 5 800 Feedmill employees Administrative employees hour R8.75 R17.75 TUTORIAL 5 (Continued) 2. Opening work-in-progress is 100% complete, apart from the conversion costs which are 50% complete. 3. Closing work in progress is 100% complete, apart from the conversion costs which are 75% complete. 4. Normal wastage of materials occurs at the beginning of the process, after all materials (inclusive of Process 1) have been added. This is expected to be 5% of input. Wastage materials have no saleable value. Additional information The company uses the first-in-first out stock valuation method. Conversion costs are incurred evenly throughout the process. Abnormal loss units do no share in the normal loss allocation. REQUIRED: a) Prepare the Process 2 account for the month ended 31 July 2015. (22) TUTORIAL 5 (30 MARKS) AGRIFARM is a company that operates several production processes by converting raw materials into bulk animal feed. Animal feed is the food given to domestic animals in the course of animal husbandry. AGRIFARM buys the raw materials of animal feed and blends them in the feed mill according to the specifications outlined by the food standards agency. The traditional sources of animal feed raw materials include household food scraps and the by-products of food processing industries such as milling and brewing. Animal feed plays an important part in the food chain and has implications for the composition and quality of the livestock products (e.g. milk, meat and eggs) that people consume. Therefore, there is little room for error in the manufacture of animal feed. Set out below is the information for AGRIFARM for the month of July 2015. This information pertains to Process 2 in the production of animal feed. Notes R 1 187 704 47 972 ? 1 Costs incurred: Transfers from Process 1 Raw material costs Conversion costs Opening work-in-progress Process 1 Raw material Conversion costs 3 009 938 2 050 2 Production: Opening work-in-progress Transfers from Process 1 Raw material inputs Completed output Closing work-in-progress Wastage Kilogram (kg) 1 200 112 000 26 800 130 000 1 600 3 Notes: 1. Conversion costs consist of labour and production overheads. Production overheads are absorbed at 200% of direct labour. AGRIFARM remunerates its production workers using the premium bonus scheme and its administrative employees using the guaranteed hourly rate. With regards to the premium bonus scheme, the bonus (based on 75% of time saved) is added to pay calculated on an hourly basis. The time allowed for each kg of animal feed is three minutes. During the month of July, employees worked as follows: Rate per Hours worked 5 700 5 800 Feedmill employees Administrative employees hour R8.75 R17.75 TUTORIAL 5 (Continued) 2. Opening work-in-progress is 100% complete, apart from the conversion costs which are 50% complete. 3. Closing work in progress is 100% complete, apart from the conversion costs which are 75% complete. 4. Normal wastage of materials occurs at the beginning of the process, after all materials (inclusive of Process 1) have been added. This is expected to be 5% of input. Wastage materials have no saleable value. Additional information The company uses the first-in-first out stock valuation method. Conversion costs are incurred evenly throughout the process. Abnormal loss units do no share in the normal loss allocation. REQUIRED: a) Prepare the Process 2 account for the month ended 31 July 2015. (22)