You are the financial manager of Projob Ltd, a large, listed company which uses a single process to manufacture widgets. During the current financial year, you employed a new management accountant who is currently studying towards her CIMA exams. Unfortunately, she does not yet fully understand process costing systems, particularly the allocation of normal losses. She has currently prepared the following information for the month of April 2021 and has requested your assistance in finalising the valuation of completed units. Understanding of the process. ProJob Ltd operates a single process. All materials are added at the start of the process while conversion costs (comprising labour and overheads) are incurred evenly throughout the process. Inspection takes place at 70% of the way through the process. ProJob Ltd operates on a FIFO basis. Opening WIP at the start of the month was at 90% of the way through the process while closing WIP was at 80% of the way through the process. The cost of opening WIP on 1 April 2021 was R35 300. Physical flow analysis and equivalent unit calculation IN OUT EQUIVALENT UNITS MATERIALS CONVERSION Opening WIP 2 000 2 000 200 Units started 7 000 Started and completed 4 000 4 000 4 000 Closing WIP 1 000 1 000 800 Normal loss 1 500 1 500 1 050 Abnormal loss 500 500 350 Total 9 000 9 000 7 000 6 400 Cost per equivalent unit calculation Current period cost (April Cost per equivalent unit 2021) Materials R98 000 R14,00 Conversion R76 800 R12,00 Normal loss valuation R Materials 21 000 Conversion 12 600 Total 33 600
You are the financial manager of Projob Ltd, a large, listed company which uses a single process to manufacture widgets. During the current financial year, you employed a new management accountant who is currently studying towards her CIMA exams. Unfortunately, she does not yet fully understand process costing systems, particularly the allocation of normal losses. She has currently prepared the following information for the month of April 2021 and has requested your assistance in finalising the valuation of completed units. Understanding of the process. ProJob Ltd operates a single process. All materials are added at the start of the process while conversion costs (comprising labour and overheads) are incurred evenly throughout the process. Inspection takes place at 70% of the way through the process. ProJob Ltd operates on a FIFO basis. Opening WIP at the start of the month was at 90% of the way through the process while closing WIP was at 80% of the way through the process. The cost of opening WIP on 1 April 2021 was R35 300. Physical flow analysis and equivalent unit calculation IN OUT EQUIVALENT UNITS MATERIALS CONVERSION Opening WIP 2 000 2 000 200 Units started 7 000 Started and completed 4 000 4 000 4 000 Closing WIP 1 000 1 000 800 Normal loss 1 500 1 500 1 050 Abnormal loss 500 500 350 Total 9 000 9 000 7 000 6 400 Cost per equivalent unit calculation Current period cost (April Cost per equivalent unit 2021) Materials R98 000 R14,00 Conversion R76 800 R12,00 Normal loss valuation R Materials 21 000 Conversion 12 600 Total 33 600
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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.
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See information attached in images below. Questions:
REQUIRED
Complete the valuation of completed and transferred out units.
Round to two (2) decimal places.
| R | |
|---|---|
| Opening WIP costs | |
| Costs to complete opening WIP | |
| - Materials | |
| - Conversion | |
| Costs of started and completed units | |
| Normal loss allocation | |
| - Materials | |
| - Conversion | |
| Total |
Transcribed Image Text:You are the financial manager of ProJob Ltd, a large, listed company which uses a single process to manufacture widgets. During the
current financial year, you employed a new management accountant who is currently studying towards her CIMA exams.
Unfortunately, she does not yet fully understand process costing systems, particularly the allocation of normal losses. She has
currently prepared the following information for the month of April 2021 and has requested your assistance in finalising the valuation
of completed units.
Understanding of the process.
ProJob Ltd operates a single process. All materials are added at the start of the process while conversion costs (comprising labour and
overheads) are incurred evenly throughout the process. Inspection takes place at 70% of the way through the process. ProJob Ltd
operates on a FIFO basis. Opening WIP at the start of the month was at 90% of the way through the process while closing WIP was at
80% of the way through the process. The cost of opening WIP on 1 April 2021 was R35 300.
Physical flow analysis and equivalent unit calculation
IN
OUT
EQUIVALENT UNITS
MATERIALS CONVERSION
Opening WIP
2 000
2 000
200
Units started
7 000
Started and completed
4 000
4 000
4 000
Closing WIP
1 000
1 000
800
Normal loss
1 500
1 500
1 050
Abnormal loss
500
500
350
Total
9 000
9 000
7 000
6 400
Cost per equivalent unit calculation
Cost per equivalent unit
Current period cost (April
2021)
Materials
R98 000
R14,00
Conversion
R76 800
R12,00
Normal loss valuation
R
Materials
21 000
Conversion
12 600
Total
33 600
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