- (a) In relation to process costing, explain the following terms:
(i) Direct material costs
(ii) Conversion costs
(b) Explain the features that are necessary for process costing to...(Solved)
(a) In relation to process costing, explain the following terms:
(i) Direct material costs
(ii) Conversion costs
(b) Explain the features that are necessary for process costing to be effectively applied in a
business entity?
Date posted: February 21, 2019. Answers (1)
- Lenga Juu Limited produces three the products; Exe, Wye and Zed in a single process. For the
month of September 2006, the following budgeted figures were...(Solved)
Lenga Juu Limited produces three the products; Exe, Wye and Zed in a single process. For the
month of September 2006, the following budgeted figures were available:
Additional information
1. Fixed overheads were absorbed at 50% of labour cost
2. There was a normal loss of 10% of material input and no abnormal loss. The normal loss was
sold as scrap at sh. 15 per kilogram which was credited to the process account
3. Exe, Wye and Zed were produced in the ratio of 5:3:2 respectively
4. There was neither opening nor closing work in progress
5. The products were sold as follows:-
Required:
Apportion the joint cost to the joint products, Exe, Wye and Zed using the following methods
i. Relative weight of output
ii. Sales value of output
b) On further processing, products Exe, Wye and Zed were converted to product A, B and C
respectively. The following prices per kilogramme were sh. 270, sh. 225 and sh. 180 for products
A, b and C respectively.
The further processing cost the company sh. 15 per kilogramme of material input. In addition the
normal loss was 10% of material input with no sales value.
Required:
Profit or loss on further processing of each of the products
Date posted: February 21, 2019. Answers (1)
- Usafi Limited operates a single process manufacturer soap. The process costs for the month of
February 2007 were as follows:-(Solved)
Usafi Limited operates a single process manufacturer soap. The process costs for the month of
February 2007 were as follows:-
Additional information:
1. The normal output of the process is 95% of material input. The loss from the process is sold for
sh. 60 per kilogram me
2. The output for the month of February 2007 was as follows:-
Finished goods 18,800 kilogram-mes
Closing work in progress 1,000 kilogram-mes
3. The degree of completion of closing work in progress was 50% for lab our and overheads and
overheads and 100% for materials.
Required:
i. Process account
ii. Abnormal gain account
Date posted: February 21, 2019. Answers (1)
- The manufacturing process of ABC limited results in three products namely Exe, Wye and Zed(Solved)
The manufacturing process of ABC limited results in three products namely Exe, Wye and Zed
Additional information;-
1. The final selling prices per litre of products Exe, Wye and Zed are shs.15, shs.18 and shs.4
respectively.
2. There are no further costs associated with by product Zed
3. Product Wye requires further processing at a cost of sh. 1.50 per litre
4. All the three products incur packaging costs of sh. 0.50 per litre before they are sold.
Required:
i) Calculate the number of equivalent units produced
ii) Calculate the costs of products Exe and Wye
iii) Apportion the common costs to joint products based on sales at the point of separation
iv) Prepare process II account for the month of January 2008
Date posted: February 21, 2019. Answers (1)
- Good Hope Pharmaceutical Company purchases raw material that is processed to yield three
chemicals namely;Zetamol,Paramol, and Bethamol.In January 2009,the company purchased 10,000
kilogrammes of the raw material...(Solved)
Good Hope Pharmaceutical Company purchases raw material that is processed to yield three
chemicals namely;Zetamol,Paramol, and Bethamol.In January 2009,the company purchased 10,000
kilogrammes of the raw material nat a cost of sh.2,500,000 and incurred joint conversion costs of
sh.700,000.Sales and production information for the month of January wered as follows;
Zetamol and Paramol are sold to other pharmaceutical companies at the split off point. Bethamol can
be sold at the split off point or processed further and packaged for sale as an asthma medication.
Required
Allocate the joint costs to the three products using;
i) The physical units sold
ii) The sales value at split off method
iii) The net realizable value method
iv) Suppose that half the production of Paramol could be purified and mixed with all the
production of Zetamol to yield parazetamol.All further processing costs amount to
sh.350,000.The selling price for parazetamol is sh.1,120 per kilogramme.Advise the company
on whether to further process Zetamol into 2,000 kilogrammes of parazetamol.
Date posted: February 21, 2019. Answers (1)
- Oxfam limited produces a product Jay in three processes. During the month of August 2009,
5,000 units were transferred from process one at a cost of...(Solved)
Oxfam limited produces a product Jay in three processes. During the month of August 2009,
5,000 units were transferred from process one at a cost of sh. 37 per unit
In addition the following costs were incurred in process two:-
Date posted: February 21, 2019. Answers (1)
- (i) Define the term 'uniform costing'.
(ii) Highlight four advantages of uniform costing'(Solved)
(i) Define the term 'uniform costing'.
(ii) Highlight four advantages of uniform costing'
Date posted: February 21, 2019. Answers (1)
- ABC Company limited produces four products A, B, C and D
The following information is provided
1. The joint processing requires 10,000 kilograms of raw materials input,...(Solved)
ABC Company limited produces four products A, B, C and D
The following information is provided
1. The joint processing requires 10,000 kilograms of raw materials input, costing sh. 6 million
2. Joint process labour and material costs are sh. 5,920,000
3. Normal loss is 20% of raw material input, with product A's output being 2000 kilogram mes,
product B's output being 2,500 kilogram mes, product C's output being 2,500 kilogram mes and
the balance being from product D. No abnormal loss was reported.
4. Product A enters into process 2 incurring a further cost of sh. 1,255,000 , product B enters
process 3 incurring a further cost of sh. 1,493,750 product C enters into process 4 incurring a
further cost of sh. 1,118,750. Product D does not require additional processing. There are no
further processing costs.
5. The company‟s policy is to apportion joint costs on the basis of output
6. The selling price of each unit of products A, B C and D is sh. 1,500, sh. 3,460, sh. 2760 and sh.
1,000 respectively.
7. The company is in the process of analyzing the performance of each product in order to make
better decisions.
Required:
a) i) Cost per unit of product A
ii) Profit and loss statement for each individual product and for the company in a columnar
format
b) The company's management intends to start using the net realizable value method to allocate
joint costs. Show how this method would affect the profitability of individual products and that
of the company in (a) (ii) above.
Date posted: February 21, 2019. Answers (1)
- Nyungu Limited is a manufacture of earthenware products. The undergo two processes; A and B(Solved)
Nyungu Limited is a manufacture of earthenware products. The undergo two processes; A and B
Additional information
1. Conversion costs are applied uniformly throughout the two processes.
2. Normal loss is 5% of throughput in both processes.
3. Scrap for normal loss is Sh. 250 per unit in process A and Sh. 500 per unit in process B.
4. Actual loss is 4,000 units in process A and 1,500 units in process B.
Required:
a) Statement of equivalent units for process A and B
b) For process A:
i) Total cost of production transferred to process B.
ii) Total cost of closing work-in-progress
c) For process B:
i) Total cost of production transferred to finished goods.
ii) Total cost of closing work-in-progress.
Date posted: February 21, 2019. Answers (1)
- Usafi Limited manufactures a brand of shampoo branded "Urembo". The company blends a liquid
soap with a special ingredient which has no significant volume. The resulting...(Solved)
Usafi Limited manufactures a brand of shampoo branded 'Urembo'. The company blends a liquid
soap with a special ingredient which has no significant volume. The resulting liquid is then put
into bottles costing Sh.5 each.
The following data relates to processing for the month of August 2011
Inputs into the blending process:
Additional information:
1. General overhead costs are absorbed on the basis of process labour costs at the rate of 100%.
2. The normal output of the blending process is 90% of input liquid soap.
3. The losses in the process take the form of a thicker soap which is sold for Sh.25 per litre.
4. The output from the process was 10,800 litres of Urembo which is equivalent to the monthly
budgeted output.
5. Each bottle of Urembo contains one third of a litre of shampoo and is sold for Sh.75.
Required:
(i) Process account for the blending in the month of August 2011.
(ii) Normal profit per bottle of shampoo.
c) The marketing department of Usafi Limited has made a proposal to rebrand Urembo as follows:
1. Change the name of the shampoo to "Urembo extra".
2. Use a different special ingredients costing 10% more than the existing one.
3. Use a different bottle design costing Sh.7.50 each but with the same capacity of one third of a
litre.
4. Undertake an advertising campaign costing Sh.4,374,000.
5. Maintain a maximum monthly budgeted output of 10,800 litres.
6. The production manager has forecasted the maximum shelf life of "Urembo extra" at 6
months.
7. Urembo extra has a potential of trading at a higher price than Urembo according to market
trend analysis.
Required:
Minimum price per bottle at which Urembo extra must be sold to maintain the company's current
profit level
Date posted: February 21, 2019. Answers (1)
- Jasho Ltd. manufactures a product branded 'Vumilia'. The marketing department of Jasho Ltd. has
expressed concern that the product has not been profitable. The department has...(Solved)
Jasho Ltd. manufactures a product branded 'vumilia'. The marketing department of Jasho Ltd. has
expressed concern that the product has not been profitable. The department has therefore
recommended that appropriate action be taken to stem the losses.
Vumilia is produced from material Exe which is one of two materials jointly produced by passing
chemicals through a process. The other material is Wye.
During the month of February 2012, the following data was recorded for the process.
Additional information:
1. Joint costs are apportioned to the two materials, Exe and Wye according to the weight of output.
2. Production costs incurred in converting material Exe into finished product "Vumilia" are Sh.3 per
kilogramme of material used.
3. Normal loss for the process is 10% with no scrap value.
4. The selling price per kilogramme of "Vumilia" is Sh.7.
5. Material Wye is sold without further processing for Sh.8 per kilogramme.
Required;
a) Calculate the profit/loss per kilogramme of product 'Vumilia' and material 'Wye'.
b) Analyse the marketing department's recommendation and advise the company as appropriate.
c) Demonstrate an alternative joint cost apportionment for product 'Vumilia'. Comment briefly on
the alternative method of apportionment.
Date posted: February 21, 2019. Answers (1)
- Smarta Ltd. manufactures flower pots for sale. The company does not carry any stock of finished
goods as it manufactures specifically to customer's orders. However, the...(Solved)
Smarta Ltd. manufactures flower pots for sale. The company does not carry any stock of finished
goods as it manufactures specifically to customer's orders. However, the company holds a range
of raw materials in the stores.
The following information relates to the company's operations for the mouths of August and
September 2012:
Date posted: February 21, 2019. Answers (1)
- (i) Briefly explain the difference between job costing and batch costing.
(ii) Outline three features of job costing.(Solved)
(i) Briefly explain the difference between job costing' and batch costing'.
(ii) Outline three features of job costing.
Date posted: February 21, 2019. Answers (1)
- a) Explain why it is necessary to distinguish between direct labour and indirect labour, with
particular reference to the effect on gross profit and net profit.
b)...(Solved)
a) Explain why it is necessary to distinguish between direct labor and indirect labor, with
particular reference to the effect on gross profit and net profit.
b) Unique Ltd. manufactures a single product. The product passes through three processes before
completion. In the month of January 2013, the following data was recorded in respect to process
Required:
i) Statement of equivalent production.
ii) Statement of costs.
iii) Process 2 account
Date posted: February 21, 2019. Answers (1)
- Nald Ltd. manufactures a chemical product and uses process costing to account for its work in
progress. During the month of October 2013, 5,000 units...(Solved)
Nald Ltd. manufactures a chemical product and uses process costing to account for its work in
progress. During the month of October 2013, 5,000 units were introduced to process 1 and the
following costs were incurred:
Additional information:
1. The normal loss in process 1 was estimated at 10%.
2. The scrapped normal loss units were sold at Sh.4 per unit.
3. Inspection is usually done at the end of the process; therefore any units scrapped would have
passed through the entire process.
Required
i) Statement of equivalent production
ii) Statement of cost
iii) Statement of evaluation of finished goods
iv) Process 1 account
Date posted: February 21, 2019. Answers (1)
- Chemtex Ltd., a chemicals manufacturing company has two departments namely; MM and NN.
Department MM produces three types of chemicals; X, Y and Z using a...(Solved)
Chemtex Ltd., a chemicals manufacturing company has two departments namely; MM and NN.
Department MM produces three types of chemicals; X, Y and Z using a common process.
Each of the chemicals can either be sold by department MM to the external market at the split-off
point or can be transferred to department NN for individual further processing into products XL, YL
and ZL respectively.
4. Further processing leads to a normal loss of 5% at the beginning of the process for each of the
chemicals being manufactured.
Required:
Advise the management on which chemical(s), if any, should be subjected to further processing
Date posted: February 21, 2019. Answers (1)
- Explain the meaning of the following terms in regard to the cost and financial accounting
systems:
i) Integrated cost accounts
ii) Interlocking cost accounts
iii) Cost ledger control account
iv)...(Solved)
Explain the meaning of the following terms in regard to the cost and financial accounting
systems:
i) Integrated cost accounts
ii) Interlocking cost accounts
iii) Cost ledger control account
iv) Cost ledger contra account
Date posted: February 21, 2019. Answers (1)
- More Ltd. is a medium size manufacturing company and it maintains separate cost and financialaccounting books. The financial accountant provided the following statement for the...(Solved)
More Ltd. is a medium size manufacturing company and it maintains separate cost and financial
accounting books. The financial accountant provided the following statement for the year ended 31
March 2004.
Required:
Prepare a profit reconciliation statement for the year ended 31 March 2004.
Date posted: February 19, 2019. Answers (1)
- Bora Ltd. Commenced its operations on 1 march 2005 with a fully paid up issued share capital of
Sh.500,000 represented by fixed assets of Sh.275,000 and...(Solved)
Bora Ltd. Commenced its operations on 1 march 2005 with a fully paid up issued share capital of
Sh.500,000 represented by fixed assets of Sh.275,000 and cash at bank of Sh.225,000.
The company has two departments; A and B.
As at 30 may 2005, the following transactions had taken place:
1. Credit purchases from suppliers amounted to Sh.573, 500 of which Sh.525, 000 were in respect
of raw materials and Sh.48, 500 were in respect of purchases classified in the ledger accounts
as production overhead items.
2. Production overhead costs absorbed in the period were:
9. Sales on credit amounted to Sh. 870,000 and the cost of these credit sales was Sh. 700,000.
10. Depreciation on production plant and equipment was Sh. 15,000.
11. Cash received from debtors totaled Sh. 520,000 and payments made to creditors totaled
Sh.150,000.
Required:
(i). Using integrated cost accounting system, record the above transactions for the three months
ended 30 May 2005.
(ii). Profit and loss account for the period ended 30 May 2005 and balance sheet as at 30 May
2005.
Date posted: February 19, 2019. Answers (1)
- State possible causes of differences between reported profits in cost accounting and financial
accounting under the non-integrated cost accounting system.(Solved)
State possible causes of differences between reported profits in cost accounting and financial
accounting under the non-integrated cost accounting system.
Date posted: February 19, 2019. Answers (1)