Process Costing Slap It On Question and Answer PDF

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Slap It On Slap It On makes paint in batches. All ingredients (raw materials) are input at the start of the mixing process and the normal loss occurs in the initial stage of the manufacturing process. There are partially completed batches (work-in-progress) at the month-end. Incomplete batches are finished in order of completeness i.e. the one closest to completion is finished first, the second closest to completion next etc. The following data was obtained for August:      

Opening WIP: 390 kgs - £562 (100% complete); conversion work: £140 (60% complete); total value of opening WIP - £702 Costs incurred: material A - 14,000 kgs at £1.19 per kg; material B - 49,000 kgs at £1.37 per kg; mixing process - £38,244 Normal loss: 5% The normal loss only applies to raw materials i.e. not opening WIP Output: 59.800 kgs Closing WIP: 1,240 kgs - 100% complete; conversion work - 80% complete

Solution Started and completed in current period Total output Opening WIP Started and completed in August

59,800 390 59,410

Abnormal gain / loss Opening WIP Material A Material B Normal loss (63,000 x 5%) Closing WIP Expected output Actual output Abnormal gain

390 14,000 49,000 -3,150 -1,240 59,000 59,800 800

Equivalent units of work

Opening WIP Started and completed in August Output Closing WIP Abnormal gain

Materials 0 59,410 59,410 1,240 -800 59,850

Mixing 156 59,410 59,566 992 -800 59,758

The cost of an equivalent unit for materials and mixing are consequently:  

Materials: (14,000 kgs x £1.19 + 49,000 kgs x £1.37) / 59,850 i.e. £1.40 per equivalent unit Mixing: £38,244 / 59,758 i.e. £0.64 per equivalent unit

The abnormal gain is valued since this is the benefit to the company of surpassing the expected level of output in August. Normal loss is not valued since this is the loss (3,150 kgs) expected to be incurred in relation to the raw materials input (63,000 kgs) to the mixing process Valuation of output, closing WIP and abnormal gain / loss Total £702 £100 £121,195 £121,997

Components

Assembly

£0 £83,174

£100 £38,021

Closing WIP

£2,371

£1,736

£635

Abnormal gain

£1,632

£1,120

£512

Opening WIP Work to complete opening WIP Started and completed in August August output

Process account

Opening WIP Material A Material B Conversion costs Abnormal gain

August Process Account £702 Output £16,660 Closing WIP £67,130 £38,244 £1,632 £124,368

£121,997 £2,371

£124,368...