Question

Oman Mechanical Services Co. Ltd. LLC is one among the largest dry charged battery manufacturing companies in the Middle East. Antara Gold, one of its leading product, is manufactured through two distinct processes P and Q. The company has a policy of fixing the selling price of the product at a margin of 20%.

The following information is obtained in relation to Process Q for the month of March 2020.
Opening stock of WIP is 1000 units valued at RO 7,000 made up of RO 4,000 for materials, RO 1,500 for labour and RO 1,500 for production Overheads. These units were 100% complete as to materials and 70% complete as regard to labour and production overheads.

5,000 units at the rate of RO 35 per unit were transferred from Process P in the beginning of the month. Further direct materials amounting to RO 16,100 were added to the process. The total labour cost and production overheads incurred are RO 22,725 and RO 14,790 respectively.

At the end of the month, 500 units are in WIP. These units were 80% complete as to materials, 50% complete as regard to labour and 60% complete as regard to production overheads.

The Production Manager of the company approached you to assist him in the preparation of the Process accounts. You are required to
a) Prepare Process Q account and calculate the total cost of producing the product.

b) Estimatethesellingpriceofthefinalproductasperthecompany’spolicyandprepare

a brief report on the production process to the Management.

Answer 1

Hi Friend,

Please refer to the solution below. Thanks.