1. avatar says

    The working that was given for this question was a bit confusing. It came from my ACCA text. Could you assist?

    A chemical is manufactured in two processes, X and Y. Data for process Y for last month are as follows.

    Material transferred from process X 2000 liters @ $4 per litre
    Conversion costs incurred $12,240
    Output transferred to finished goods 1600 liters
    No losses occur in the process.

    Closing work in progress is fully complete for material, but is only 50% processed.

    What is the value of the closing work in progress (to the nearest $)?

  2. avatar says

    Hi sir
    Could you explain how you can do the calculation without the output units

    The following data relate to a process:

    The normal loss is 3% of input and all losses are sold as scrap for $8 per unit.

    This period the actual loss is 80 units. There is no work-in-progress.

    What is the total value of the finished units this period.

    • Profile photo of John Moffat says

      You cannot do this without knowing how many units were output (or alternatively. how many units were input – you can then work out how many were output).
      Also, of course, you need more information about the costs to be able to value the finished units!

      • avatar says

        Hi sir
        I saw this question in the mock exam on the open tuition mock exam and i did not see an option in the answer to say that the question needed more information.

      • Profile photo of John Moffat says

        You have only typed a tiny bit of the question. The question says against materials how many units are input (and so you can calculate the output). The question also tells you all the costs.

      • avatar says

        I am just seeing that the question i posted did not include the top section showing the input units and costs. Sorry about that but in any case how is that calculation without the output units

      • avatar says

        So would this calculation be correct

        Normal loss 2000* 3% = 60
        Expected output 2000-60 = 1940

        Abnormal loss 80-60 = 20

        Cost per unit: (4000 – 60) + 3120/1940 = $3.63

        Value units
        Out put 1940 * $3.63 = $7042, Normal loss 60 * $8 = $480, Abnormal loss 20 * $8 = $160
        Therefore $7042 + $480 + $160 = $7682

      • avatar says

        This question also came from the mock test.
        I know that once the return on investment is lower than cost of capital then the residual income will decrease but do you reason out the return on investment part of it

        An investment division earns a return on investment of 15% and a residual income of $200,000. The cost of capital is 18%. A new project gives a return on capital employed of 16%.

        If the new project is accepted, what will happen to the investment division’s return on investment and
        residual income?

        Could you provide guidance how to answer this question as well.
        1. A company manufactures a single product. Budgeted production for the first three months of next year is as follows:

        Each unit uses 4kg of raw material costing $5 per kg.. The budgeted raw material inventory at the end of each months is to be 20% of the following month’s production.

        What are the budgeted raw material purchases for month 2 of next year?

        2. At the start of the year a company employed 2,000 employees.

        During the year 400 employees left the company.

        At the end of the year there were 2,200 employed.

        What was the labour turnover rate for the year (to the nearest %)?

        my issue was to determine the number of replacements with this one

        3. What would be the effects on the EOQ and the total annual order cost of an increase in the holding cost per unit.

        I can figure the EOQ section cause i plug in figures to help me but not sure about the annual holding cost bit

      • avatar says

        Guidance on this well too. i figured P but cannot get Q at all.

        Two investments are available. Investment P offers interest of 5% per year compounded half-yearly for a period of 4 years. Investment Q offers one interest payment of 18% at the end of its 4 year life.

        What is the annual effective interest rate offered by each of the two investments?

        It would have been nice if the system showed how the answers were derived so students can know where they went wrong in procedures.

      • Profile photo of John Moffat says

        Process costing: If the question asks you to value the finished units, why have you valued the losses also?

        Return on investment: The new project gives a return that is higher than the current ROI, so the ROI will increase.

        Budgeting: you have not typed what the production is for the first three months of next year, so it is impossible to answer.

        Employees: if 400 left, and there were more employees at the end of the year than at the beginning, it must mean that all 400 were replaced.

        EOQ: The question does not ask about the annual holding cost – it asks about the annual order cost. Since the EOQ will be smaller, there will have to be more orders, so the annual order cost will increase.

        Interest: If r is the annual interest rate, the (1+r)^4 = 1.18

        PLEASE: do not post all these questions under a lecture on Process Costing. This section is for comments on the lecture.
        If you have other questions then post them on the Ask ACCA Tutor forum.

      • avatar says

        could you really please answer the process costing question cause i just cant seem to figure out hiw to derive the cost per unit

      • avatar says

        I have figured it out now. Normal loss 2000 *3% = 60
        Expected output 2000-60 =1940, output 2000-80 = 1920
        Normal loss 60 * $8 = 480. Cost per unit 4000 -480 +3120 + 1120/1940 = $4
        Finish goods 1920 *$4 = 7680

      • avatar says

        Sorry about the questions in the wrong forum. I valued the losses as that was the only i could come close to the correct answer given by the system. I am confused about it

  3. Profile photo of John Moffat says

    The course notes and the lecture both explain this.

    In example 1, the losses have no sale value.
    In example 2, the losses are sold for $5 a kg and any sale proceeds of normal losses are subtracted from the costs (i.e. treated as a negative cost)

  4. avatar says

    In the Example # 2 the 300 KG of Normal loss whose value will be 1500$ (300* 5$) but why this value 1500 $ has been subtracted from the value 52800 $? Explain this.Because in the example #1 the Value of Normal loss was not subtracted only the kg value was subtracted.

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