Question

W Ltd. Chemicals process a range of products including a detergent “Blasto”, which passes through three processes before completion and transfer to the finished goods warehouse. The following data relates to the month of April:

                                                            Process 1         Process 2         Process 3         Total

                                                                   $                      $                      $                   $

Direct material added in process           8,500              9,500               5,500            23,500

Direct wages                                           4,000              6,000            12,000            22,000

Direct expenses                                      1,200                 930               1,340            3,470

Production overheads                                                                                                 16,500

Output (units)                                        9,200            8,700                7,900           

Normal loss (% of input units)                  10                     5                     10

Scrap value                                            $0.20            $0.50                $1.00

10,000 units at $0.60 each were issued to process 1.

The production overheads are absorbed as a percentage of direct wages.

REQUIRED:

(a)       Prepare the following accounts

            i)         Process 1

            ii)        Process 2

            iii)       Process 3

            iv)       Abnormal Loss

            v)         Abnormal Gain

            vi)       distinguish between abnormal loss and abnormal gain

Answer 1

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