In: Accounting
Asana company limited is into production of bricks .For the period jut ended 30 April the company initiated 2,500units of material ODA into production expecting 15% to go waste. However ,80% of the input mayerial came out as good. It cost Asana company 50,000GHS to obtain the material. Labour cost has be agreed at 60% of the material cost whilst overhead cost is always at ¾ of the material cost. Normal loss can be sold at 1.50GHS per unit.
Required:
i) Estimate the cost of each finished good
ii) What is the value of abnormal loss/ abnormal gain if any?
iii) Show the process account
iv)State three features of process costing system
Solution
i | Cost of each finished good | ||
Particulars | Amount (in GHS) | ||
Cost of Material | 50,000 | ||
Labour Cost ( 60% of material cost) | 30,000 | ||
Overheard (3/4 of $50000) | 37,500 | ||
Total Cost | 117,500 | ||
Calculation of Normal Loss | |||
Units Production | 2500 | ||
Normal Loss Percentage | 15% | ||
Normal Loss units | 375 | ||
Units after normal loss | 2125 | ||
Normal loss units sale price | 1.5GHS | ||
Income from sale of normal
loss units (375 % 1.5) |
525.5 | ||
Cost of each finished Goods | |||
Particulars | Amount (in GHS) | ||
Total Cost (a) | 117,500 | ||
Income from sale of normal loss units (b) | 525.5 | ||
Units after normal loss (c ) | 2125 | ||
Cost of each finished Goods (a-b)/(c ) | 55.03 | ||
ii | Value of abnormal again/loss | ||
Units Production | 2500 | ||
Output came out good (80 % of 2500) | 2000 | ||
Units lost | 500 | ||
Normal Loss units | 375 | ||
Abnormal loss units (500-375) | 125 | ||
Value of abnormal loss (125 * 55.03) |
6878.75GHS | ||
iii | Particulars | Units | Amount | Particulars | Units | Amount | |
To Material | 2500 | 50000 | By Normal Loss | 375 | 562.5 | ||
TO Labour | 30000 | By Abnormal Loss | 125 | 6878.75 | |||
To Overhead | 37500 | ||||||
By finished output (aproximate) | 2000 | 110058.75 | |||||
(2000*55.03) | |||||||
117500 | 117500 | ||||||
iv | Three Features of Process Costing |
Most important feature of process costing system is output of one process becomes the input of another process till the final finished product is ready | |
Costs of each process is collected process wise | |
Products are identigcal, homogenous and unsegregated | |
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