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Process costing.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Process costing.

  • This topic has 5 replies, 3 voices, and was last updated 9 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • July 14, 2015 at 5:39 pm #260777
    maan87
    Member
    • Topics: 119
    • Replies: 155
    • ☆☆☆

    Hi..john sir ..plz help me with the following..though the question iz long but i expect that u will help me.its my first time i m giving u a long question..plz..?

    Details are as follow.

    Sep30. Oct 31

    Materials. 100000 kg. 80’000 kg
    material cost. $100,000

    W.i.p opening is 20,000 units which costs $84000. Its stage of completion is 100 percent as to material and 40 percent as to labour..

    W.i.p closing is 30,000 units. Its stage of completion is 100 percent to material and 33.333 percnt to conversion.

    Finished goods opening inventory is 40000 units which has a cost of $ 448000 and closing inventory is 24000 units.

    Purchase of material 440,000kg @1.10 each.

    Transfered to production 460,000 kg.
    Production ratio..2kg : 1 unit of finishd product.

    Completed during month 220000 units.
    direct labour. $1198800
    Foh. $421800.

    Requirmnts:
    a..under fifo..equivalent units for mat and conversion.

    B..unit cost for three elements under fifo

    C..cost of units tranferred to finishd good inventory under fifo

    D..cost of ending work in progress under fifo

    E..num of units sold and the cost of finished goods inventory using fifo..

    Plz john sir ..i m not sure about my answers ..i m confused more due to the presence of finished good opening and closing inventory..more over purchase of material and so on..that is confusing

    July 15, 2015 at 9:11 am #260816
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    I assume that you have the final answers in the same book as the question.

    First you need to sort out the raw materials. The opening inventory is 100,000 kg with a value of $100,000. They buy 440,000 kg with a value at $1.10 of $484,000.
    460,000 kg is transferred to production, which leaves 80,000 kg in closing inventory which is value at $1.10 per kg, so total value of closing inventory is $88,000.

    This means that the amount transferred to production is 460,000 kg with a value of 100,000 + 484,000 – 88,000 = $496,000.

    This is what is debited to the process account as the cost of the material used.

    Then it becomes a normal process costing question – you know the opening and closing WIP; you know the material input (460,000/2 = 230,000 units at a cost of $496,000), you know the conversion costs for the month, and you know the units output (220,000).

    Once you have calculated the costs per unit you can calculate the value of the closing WIP and the value of the 220,000 units transferred to finished goods.

    When you have this, you can do a finished goods account – there is opening inventory of 40,000. Production is 220,000 units. Closing inventory is 24,000 units. Therefore the units sold are 40,000 + 220,000 – 24,000 = 236,000, and you will already have the unit values.

    Hope that helps 🙂

    July 26, 2015 at 10:49 pm #262408
    rkwasim
    Member
    • Topics: 7
    • Replies: 28
    • ☆

    Hey john,

    A company manufactures three joint products and one by-product from a single process. Data for May are as follows.
    s
    Opening and closing inventories Nil Raw materials input $180,000 Conversion costs $50,000
    ca
    c
    Output Sales price
    a
    Units $ per unit Joint product L 3,000 32 M 2,000 42 N 4,000 38 By-product R 1,000 2
    free
    By-product sales revenue is credited to the “sales account”. Joint costs are apportioned on a sales value basis. Thanks

    Above is the question. Could you tell me what is the double entry for by product in process account and sales account.

    July 27, 2015 at 8:05 am #262428
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    There is no entry for the by-product in the process account.

    The entry when it is sold is simply Dr Cash (or Receivables); Cr sales.

    August 8, 2015 at 9:42 pm #266285
    rkwasim
    Member
    • Topics: 7
    • Replies: 28
    • ☆

    Hey john,
    Could you please explain me, why they didn’t credited by product in process account in above question. Secondly why we wouldn’t subtract by product cost from total cost incurred during process. Thanks

    August 9, 2015 at 9:27 am #266318
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    Although we usually credit the process account with the revenue from the by-product (Dr Cash Cr Process), this question says that the sales revenue is credited to the sales account. So Dr Cash Cr Sales. It simply means that they are recording the revenue as a sale rather than as a reduction in the joint costs.
    (Incidentally, in general don’t worry about the t-accounts here – the questions in the exam are not normally bothered about the actual entries – just about the values given to the products).

    I don’t know what you are meaning by your second sentence.

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