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 $)?

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!

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.

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.

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

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鈥檚 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鈥檚 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

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.

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.

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

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

you are the best teacher,i am so saturated by your lectures that i am only listening in to learn your upper class english accent.thanks a million and keep up the good work

…so it isn’t only me then 馃檪 I totally agree. Killing two birds with one stone. Pleasure to listen to and a breeze to understand the topic (with a few giggles on the way). Superb!

@adnanaadi101, What loss account? There is no loss account unless there are abnormal losses or gains. Watch the later lectures where there are abnormal losses and gains.

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)

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.

Renee 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 $)?

John Moffat says

Please ask questions in the Ask the Tutor Forum – not as a comment on a lecture.

Emily says

hello sir, where does the $51300 come from?

John Moffat says

The total of the costs (as in the question in the lecture notes) is 52,800.

The question also say that the losses have a scrap value of $5 per unit. So with a normal loss of 300 kg there is expected scrap proceeds of 1,500.

52,800 – 1,500 = 51,300

Emily says

oh thank you very much sir

godze26 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.

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!

godze26 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.

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.

godze26 says

There is no other parts to the question just the options for the answers

John Moffat says

I have just checked – the whole question is there!

godze26 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

John Moffat says

Since you know how many units were input, and you know how many were actually lost, then the difference is the output.

godze26 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

godze26 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鈥檚 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鈥檚 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

godze26 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.

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.

godze26 says

Sir

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

godze26 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

godze26 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

calvince85 says

John, you are the best! Many many thanks for the good lectures! They are truly helpful. God bless you very much.

calvince85 says

John, you are the best! Many many many thanks! God bless you for good work!

saqibsheeraz says

Excellent !

hmanjiche says

you are the best teacher,i am so saturated by your lectures that i am only listening in to learn your upper class english accent.thanks a million and keep up the good work

John Moffat says

Thank you very much, but my accent is certainly not upper class!! I am originally from Manchester and we are not upper class in Manchester 馃檪

Patrycja says

…so it isn’t only me then 馃檪 I totally agree. Killing two birds with one stone. Pleasure to listen to and a breeze to understand the topic (with a few giggles on the way). Superb!

lelouch says

why cant play the video?

anare says

Brilliant! thanks so much!

afridi9rizwan says

this is magnificent

gahraman says

should not be assumption there that 1 unit contains 1 kg of material(a unit=a kg)? Because, under heading kg you say units..

John Moffat says

@gahraman, I say at the beginning of the lecture that in this example it is in kg rather than in units. The same happens in the examination.

adnanaadi101 says

where is the loss a/c?

John Moffat says

@adnanaadi101, What loss account? There is no loss account unless there are abnormal losses or gains. Watch the later lectures where there are abnormal losses and gains.

tpw says

superb

tauraiversatile says

“Happy Happy”…. You deserve a high 5 lecturer, this is superb!

Reena says

Short Class very interesting with more simplicity .Thanks you Opentuition Team.

M. Osman Kamran says

Great!

daintykim says

I love these lectures. Thank you

wildcorazon says

i cant get this video to play

dtaderera says

very clear understandable and enjoyable

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)

maniali272 says

@johnmoffat, Thanks I have got it now.

Abdullah says

Why we subtract scrap value? I don’t get the logic, because we are getting some money from it even it is loss? I am so confused

John Moffat says

The fact we are getting some money from it is why we subtract it from the costs – it reduces the cost of what is produced.

Abdullah says

Thanks

maniali272 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.

M. Osman Kamran says

@maniali272, Because in the second example the damaged material will be sold per Kg $5.