Management accounting - process costing?

Question

please could some 1 help me answer this question?

a company manufactures a single product which passes through several production processes. the following information relates to process 1 puring the last period.

material input 20,000 kg @ £3.00 per kg

labour 15,000 hours @ £6.00 per hour

overheads 120% of labour

closing work in progress 3,000 kg

completed output 15,000 kg

five per cent of input is expected to be lost at the end of the process.

there is no opening work in progress

closing work in progress was 100% complete for material but only 70% complete for labour and overheads. all losses are sold at the end of the period for £2 per kg.

REQUIRED

a) Prepare the process 1 account for the period.

b) Prepare normal and abnormal loss accounts for the period

Answer 1

Total inputs = 20,000 Kg

Good Units Completed = 15,000kg

With Ending WIP = 3,000kg

you still have 2,000kg unaccounted for. 5% of 20,000 or 1,000kg is expected normal spoilage. You still have 1,000kg unaccounted for and therefore this one needs to be accounted as abnormal spoilage.

I don't know whether you are using average method/ FIFO method. I'm using average.

Your EU =

Completed goods = 15,000 for Material & 15,000 for Conversion

Normal Spoil = 1,000 & 1,000

Abnormal Spoil = 1,000 & 1,000

Ending Inventory = 3,000 & (70%) = 2,100

Total EU = 20,000 for Material & 19,100 for Conversion

Cost per unit then = 20,000 x 3 = 60,000 divide by 20,000 = 3 for material

& (15,000 x 6) + (15,000 x 6 x 120%) = 198,000 divide by 19,100 = 10.36649215 for Conversion

Total = 13.36649215

COGM = 15,000 x 13.36649215 = 200,497.38 (charged to FG a/c against WIP)

Normal Spoil = 1,000 x 13.36649215 = 13,366.49 (charged to MO actual a/c against WIP)

Abnormal Spoil = 13,366.49 (Charged to 'Loss from Abnormal spoil a/c against WIP. The 2 pounds/ kg income from needs also to be credited against this same a/c, so you will have smaller loss).

Ending = 30,769.63

Total = 258,000