A company manufacture it main product in two different consecutive processes, process 1 and process 2. The output from process 1 is transferred to process 2 the output of process 2 is sent to the packaging department. Information for the week ended 31 August 2009 is as follows; Process 1 Input Material X 18,00kg @ GH¢1 per kg Material Y 12,000 kg @ GH¢2 per kg Labour 1,720 hours @ GH¢3 per hour Normal loss 5% of input Sales price of scrap GH¢0.32 per kg Output 27,000 kg There was no opening stock but 600 kg of closing work in progress in process 1 at the end of the week which is estimated to be 60% complete with regard to conversion cost. Process 2 Input Material P 19,800 kg @ GH¢2.5 per kg Material Y 12,600 kg @ GH¢1.5 per kg Additives GH¢1,800 Labour 1,480 hours @ GH¢3 per hour Normal loss 5% of input Output 56,000 kg There was no opening WIP but there 3,000 kg in process 2 at the end of the week which is estimated to be 50% complete with regard to labour and overheads. Total overheads of GH¢19,200 was charged to the process and was absorbed on the basis of labour hours. Losses are detected in both processes when it is 75% complete. Required Prepare the following accounts for the week just ended i. Process 1 and process 2 account ii. Abnormal loss and / or gain account iii. Scrap account
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
A company manufacture it main product in two different consecutive processes, process 1 and
process 2. The output from process 1 is transferred to process 2 the output of process 2 is sent to
the packaging department. Information for the week ended 31 August 2009 is as follows;
Process 1
Input Material X 18,00kg @ GH¢1 per kg
Material Y 12,000 kg @ GH¢2 per kg
Labour 1,720 hours @ GH¢3 per hour
Normal loss 5% of input
Sales price of scrap GH¢0.32 per kg
Output 27,000 kg
There was no opening stock but 600 kg of closing work in progress in process 1 at the end of the
week which is estimated to be 60% complete with regard to conversion cost.
Process 2
Input Material P 19,800 kg @ GH¢2.5 per kg
Material Y 12,600 kg @ GH¢1.5 per kg
Additives GH¢1,800
Labour 1,480 hours @ GH¢3 per hour
Normal loss 5% of input
Output 56,000 kg
There was no opening WIP but there 3,000 kg in process 2 at the end of the week which is
estimated to be 50% complete with regard to labour and
GH¢19,200 was charged to the process and was absorbed on the basis of labour hours.
Losses are detected in both processes when it is 75% complete.
Required
Prepare the following accounts for the week just ended
i. Process 1 and process 2 account
ii. Abnormal loss and / or gain account
iii. Scrap account
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