Question

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   

Answer 1

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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