The Mitchell Construction Company uses a process-cost system. Materials are added at the beginning of a particular process and conversion costs are incurred uniformly. The following data relates to February 2017:
Opening work in progress 400 units
Units started during the month 5,200 units
Closing work in progress 150 units
Cost of materials in April €31,980
Conversion costs in April €21,580
Cost of materials, opening work in progress €2,740
Conversion costs, opening work in progress €640
The opening work in progress is fully complete regarding materials and 40% complete regarding conversion costs.
The closing work in progress is fully complete regarding materials and 70% complete regarding conversion costs.
No units were lost in the production process in February 2017
Prepare a cost-of-production report for February 2017, indicating the cost of finished goods and the cost of closing work in progress using the following two methods:
(a) The first-in-first-out method (FIFO); and
(b) The weighted-average method
Jumco Limited, which uses process costing, manufactures a single product which passes through two processes, the output of process 1 becoming the input of process 2.
Normal losses and abnormal loss are defective units having a scrap value and cash is received at the end of the period for all such units. The following information relates to a four-week period:
18,000 units of raw material were issued to process 1 at a cost of €5.00 per unit. There was no opening or closing work in progress but opening and closing stocks of finished goods were €30,000 and €35,000 respectively.
Process 1 Process 2
Normal loss as a percentage of input 4.50% 6.00%
Output in units 17,150 16,150
Scrap value per unit – € 2.00 6.00
Direct wages incurred – € 15,000 25,000
Additional components – € 10,140 11,176
Production overhead as a percentage of
Direct wages 80% 45%
Present the accounts for the following:
- Process 1
- Process 2
- Finished goods
- Normal loss
- Abnormal loss
- Abnormal gain
BKC Limited produces three joint products in one common process but each product is capable of being further processed separately after the split-off point. The estimated data given below relate to January 2017:
Product B Product K Product C
€ € €
Selling price at
the split-off point 10 18 20
after further processing 20 30 45
Post separation point costs 33,000 35,000 42,300
Output in Litres 7,000 5,000 4,000
Pre-separation point joint costs are estimated to be €60,000 and it is current practice to apportion these costs to the three products according to litres produced.
- Prepare a statement of estimated profit or loss for each product and in total for January 2017 if all three products are processed further.
- Advise how profit could be maximised if one or more products are sold at the split-off point. Your advice should be supported by a profit statement.