Question

In: Accounting

Gamma Manufacturing Co. Ltd. makes a product by way of three consecutive processes. The following data...

Gamma Manufacturing Co. Ltd. makes a product by way of three consecutive processes.

The following data relates to process 2 for the month of May.

(i) During May, 1,500 units valued at $226.50 each were transferred from process 1 to process 2.

(ii) Other costs incurred during the month were:

Direct material added                         $114,750

Direct manufacturing wages               $124,850

Manufacturing overheads                   $158,250

(iii) 200 units were scrapped during the period. Normal losses were estimated to be 81/3% of input during the period. The scrap value of any loss is $78.00 per unit.

(iv) Work-in-progress at the end of May was 400 units and had reached the following degree of completion: Transfer from process 1 100% Direct material added 75% Direct manufacturing wages 40% Production overhead 20%

(v) There were no unfinished goods in process 2 at the beginning of the period.

Required:

(a) Prepare a statement of equivalent production to determine the equivalent units and conversion costs and the cost per equivalent unit for direct materials (From Process 1 & Direct Material Added), Manufacturing Wages & Manufacturing Overhead.

(b) Calculate the: - Total cost of feed completed and transferred to Process 3 - Cost of abnormal losses - Cost of ending work-in-process inventory in Process 2

(c) Prepare the Work-In-Process Inventory - Process 2 T-account, clearly showing the ending balance.

(d) State the journal entries necessary to record the assignment of direct materials, direct manufacturing wages and manufacturing overhead applied to Process 2. Also give the journal entries to record the cost of product completed and transferred to Process 3.

Solutions

Expert Solution

a) Statement of Equivalent Production
Particulars Units Units MATERIAL LABOUR OVERHEAD
% UNITS % UNITS % UNITS
Transfer from Process 1 1500 0 0 0 0 0 0
PROCESSED AND TRANSFERRED 900 100 900 100 900 100 900
NORMAL LOSS** 125 100 125 100 125 100 125
ABNORMAL LOSS (200-125) 75 100 75 100 75 100 75
WORK IN PROCESS 400 100 400 40 160 20 32
EQUIVALENT UNITS 1500 1500 1500 1260 1132
NORMAL LOSS= INPUT UNITS * NORMAL LOSS
                              =1500*8 1/3%
                              =125
Cost per unit of Equivalent units
Particulars Total Cost No of Units Cost per Unit
Material (226.50*1500 + 114750) less scrap value 9750 (78*125) 444750 1500 296.5
Labour 124850 1260 99.09
Overhead 158250 1132 139.80
Total 535.38
b) Calculation of Cost
Particulars Units Cost Per Unit Total Cost
Unit Transferred 900 535.38 481846
Normal loss 125 535.38 66923
Abnormal loss 75 535.38 40154
Work in process (400*296.5 + 160*99.09 +32*139.80) 138928
c) Process 2 account
Particulars Amount Particulars Amount
To Process 1 A/c 339750 By Normal Loss 66923
To Material added 114750 By Abnormal Loss 40154
To Labour Charges 124850 By Units Transferred to Process 3 Account 481846
To Overhead Charges 158250 By Work In process 138928
By Scrap realised of Normal Units 9750
Total 737600 Total 737600

ekkarill92 answered 1 year ago
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