# Cost and Management Accounting Homework

Tutorial 3: Questions

 General Advice: Before you start reading the questions which are shown below, please study carefully the lectures notes of Week 3, Chapters 5-6 of the textbook, the Multiple Questions of Lecture 3 and the Case Study of Week 3.

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Question 1: No opening and ending work in process (Review problem 5.21, textbook page 128)

‘No Friction’ is an industrial lubricant, which is formed by subjecting certain crude chemicals to two successive processes. The output of process 1 is passed to process 2, where it is blended with

other chemicals. The process costs for period 3 were as follows:

 Guidance for Q1 Ideally, you will need less than 45 minutes to prepare and detailed and well-written response to this question. Reference. Lecture 3, Textbook: Ch. 5. Top tips. This is a typical process costing question where all output is fully complete. ·         There is no opening/closing WIP. ·         Thus, there is no need to use a detailed cost analysis sheet to calculate the cost per unit. ·         Merely, dividing the cost of input (adjusted for scrap value) with the expected output will give the cost per unit. ·         Calculate normal loss  = input x 20%, difference between normal loss and output is abnormal ·         A tricky point is how to allocate the general overheads of 357. You need to sum the labour costs of both processes and apportion the overheads based on the corresponding proportions. ·         Study scenario A4 and A5 from powerpoint slides.

Question 2: Opening and ending work in process (Review problem 5.20, textbook page 127)

CW Ltd makes one product in a single process. The details of the process for period 2 were as follows:

There were 800 units of opening work in progress valued as follows:

 Guidance for Q2 Ideally, you will need less than 45 minutes to prepare and detailed and well-written response to this question. Reference. Lecture 3, Textbook: Ch. 5. Top tips. This is a typical process costing question incomplete with closing WIP. However, normal losses occur. ·         It is necessary to use a detailed cost analysis sheet to calculate the cost per unit. ·         Calculate normal loss = input x (expected loss)%, difference between normal loss and output is abnormal. ·         Study the concept of equivalent units. ·         Study Scenario B and C from powerpoint slides (33-43 slides). ·         Attention! This is an exercise where normal losses occur and when units are both fully and partially complete. ·         Study example 5A.1 from the textbook (page 122-123) and especially the short-cut method (page 123)

Question 3: (Ab) Normal Losses in Process (Review problem 5.22, textbook page 128)

Chemical Processors manufacture Wonderchem using two processes, mixing and distillation. The following details relate to the distillation process for a period:

 Guidance for Q3 Ideally, you will need less than 45 minutes to prepare and detailed and well-written response to this question. Reference. Lecture 3, Textbook: Ch. 5. Top tips. This is a typical process costing question with incomplete closing WIP. However, normal losses occur. ·         It is necessary to use a detailed cost analysis sheet to calculate the cost per unit. ·         No Opening WIP ·         Calculate normal loss  = input x (expected loss)%, difference between normal loss and output is abnormal. ·         Study the concept of equivalent units. ·         Study Scenario B from powerpoint slides (33-39 slides). ·         Attention! This is an exercise where abnormal and normal losses occur and when units are both fully and partially complete. ·         Study example 5A.1 from the textbook (page 122-123) and especially the short-cut method (page 123+124)

Question 4: Joint and By-product costing: Process costing and a decision on further processing (Review problem 6.14, textbook page 142)

Corcoran Ltd operate several manufacturing processes. In process G, joint products (P1 and P2) are created in the ratio 5:3 by volume from the raw materials input. In this process, a normal loss of 5 per cent of the raw material input is expected. Losses have a realizable value of ￡5 per litre. The company holds no work in progress. The joint costs are apportioned to the joint products using the physical measure basis. The following information relates to process G for last month:

 Guidance for Q4 Ideally, you will need less than 45 minutes to prepare and detailed and well-written response to this question. Reference. Lecture 3, Textbook: Ch. 5-6. Top tips. This is a typical process costing question with incomplete closing WIP. However, normal losses occur. ·         No Opening WIP ·         Calculate normal loss  = input x expected output%, difference between normal loss and output is abnormal. ·         Study Scenario A6 from powerpoint slides. ·         Study the accounting treatment for by-products (page 140 of the textbook) ·         Attention! This is an exercise where abnormal gains and normal losses.

Question 4: Preparation of joint and by-product process account (IM 6.4, page 145)

XYZ plc, a paint manufacturer, operates a process costing system. The following details related to process 2 for the month of October:

Required:

(a) Prepare the process 2 account for the month of October, apportioning the common costs between the joint products, based on their values at the point of separation.

(b) Prepare the abnormal loss/gain account, showing clearly the amount to be transferred to the profit and loss account.

(c) Describe one other method of apportioning the common costs between the joint products, and explain why it is necessary to make such apportionments, and their usefulness when measuring product profitability.

 Guidance for Q4 Ideally, you will need less than 45 minutes to prepare and detailed and well-written response to this question. Reference. Lecture 3, Textbook: Ch. 5. Top tips. This is a typical process costing question with incomplete closing WIP. However, normal losses occur. ·         It is necessary to use a detailed cost analysis sheet to calculate the cost per unit. ·         Opening Opening WIP ·         Calculate normal loss  = input x 20%, difference between normal loss and output is abnormal. ·         Study the concept of equivalent units. ·         Study Scenario B and C from powerpoint slides (33-39  and 40-43 slides). ·         Attention! This is an exercise where abnormal and normal losses/gains occur and when units are both fully and partially complete. ·         Study example 5A.1 from the textbook (page 122-123) and especially the short-cut method (page 123+124) ·         Also, study FIFO (powerpoint slides 43-45)

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