Question 12.RQ.59: A company manufactures a variety of liquids which pass throu...
A company manufactures a variety of liquids which pass through a number of processes. One of these products, P, passes through processes 1, 2 and 3 before being transferred to the finished goods warehouse.
The following process 3 data is available for October:
£
Work in process at 1 October is 6,000 units, valued as:
Transfer from process 2 14,400
Materials added 2,160
Wages and overhead 2,880
19,440
Transfer from process 2 during October:
48,000 units 110,400
Transferred to finished goods: 46,500 units
Costs incurred:
Materials added 27,180
Wages and overhead 54,720
Work in process at 31 October: 4,000 units
Degree of completion:
Materials added: 50%
Wages and overhead: 30%
Normal loss in process: 6% (units in opening WIP plus transfers from process 2 lessclosing WIP)
At a certain stage in the process, it is convenient for the quality control inspector to examine the product and, where necessary, to reject it. Rejected products are sold for £0.80 per unit. During October an actual loss of 7 per cent was incurred, with product P having reached the following stage of production:
Direct materials added: 80%
Wages and overhead: 60%
Requirements
The cost per equivalent unit produced was:
(a) process 2 input: £\boxed{ \ \ \ \ \ \ \ \ \ \ } per equivalent unit
(b) material added: £ \boxed{ \ \ \ \ \ \ \ \ \ \ } per equivalent unit
(c) wages and overhead: £\boxed{ \ \ \ \ \ \ \ \ \ \ } per equivalent uni
● You will find process costing questions much quicker and easier to answer if you learn a pro-forma layout for your working papers, but remember that you will earn no marks for your workings.
● When you are carrying out your equivalent units calculation, remember that any units that are now in process 3 must be complete as regards process 2 input.
The cost per equivalent unit produced was:
(a) process 2 input: £2.40 per equivalent unit
(b) material added: £0.60 per equivalent unit
(c) wages and overhead: £1.20 per equivalent unit
Workings
| Input | Units | Output | Units | Process 2 input | Material added | Wages and overhead |
| Opening WIP | 6,000 | Finished goods | 46,500 | 46,500 | 46,500 | 46,500 |
| Process 2 | 48,000 | Normal loss | 3000¹ | __ | ||
| Abnormal loss | 500² | 500 | 400 | 300 | ||
| Closing WIP | 4,000 | 4,000 | 2000 | 1,200 | ||
| 54,000 | 54,000 | 51,000 | 48,900 | 48,000 | ||
| Costs | £ | £ | £ | £ | ||
| Opening WIP | 14,400 | 2,160 | 2,880 | |||
| Input costs | 110,400 | 27,180 | 54,720 | |||
| Normal loss value | (2,400) | __ | __ | |||
| 122,400 | 29,340 | 57,600 | ||||
| Cost per unit | 4.20 | 0.60 | 1.20 |
Notes:
1. Normal loss = 6% × (6,000 + 48,000 – 4,000) = 3,000 units.
2. The abnormal loss is found as a balancing figure in the input/output reconciliation