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- Wanga Ltd. manufactures a wide range of products. The company has approached you for advice
on an order for a product branded 'Venzo'. This is a...(Solved)
Wanga Ltd. manufactures a wide range of products. The company has approached you for advice
on an order for a product branded "Venzo". This is a one-off order.
The costs associated with the order are as follows:
Additional information:
1. Material A: The cost of Sh.10 per kilogramme is the original purchase cost incurred several
years ago. This material is no longer in use by the business and if not used for this order, it
would be sold as scrap at Sh.3 per kilogramme.
2. Material B: This is in continuous use by the business. The historical cost of the material was
Sh.7 per litre although current supplies are being purchased at Sh.6.50 per litre.
3. Material C: Wanga Ltd. has 600 kilogrammes of this material in stock and new supplies
would cost Sh 4 per kilogramme. If the current stock of this material is not used for the order,
it would be used as a substitute for Material Z which cost Sh.7 per kilogramme in another
production process. 2 kilogrammes of Material Care substituted with I kilogramme of
Material Z.
4. Department X: This department has spare labour capacity sufficient for the order which
would be retained within the department.
5. Department Y: This department is currently working at full capacity. The existing staff could
either work overtime to complete the order, paid at 150% of normal rate or Wanga Ltd. could
divert labour hours from the production of other units that currently average a contribution of
Sh.3 per labour hour.
6. Overheads: These are absorbed at a pre-determined rate. There will be no incremental costs
incurred as a result of accepting this order.
Required:
i. Advise the management of Wanga Ltd. on the minimum price that they should accept
for product 'Venzo'.
ii. Justify your treatment of each cost as either relevant or irrelevant as applicable in
each case.
Date posted: February 21, 2019. Answers (1)
- Tamu Ltd. manufactures three products namely; Exe, Wye and Zed. The following information
relates to the company's budget for the first quarter of the financial year...(Solved)
Tamu Ltd. manufactures three products namely; Exe, Wye and Zed. The following information
relates to the company's budget for the first quarter of the financial year ending 31 December
2015:
Additional information;-
1. The above budget is based on full production capacity.
2. The factory manager proposes that if the whole production capacity was used to produce each
product in turns, then at any given time, 24 units of Exe, 12 units of Wye and 9 units of Zed could
be manufactured and that production switching costs would be negligible.
3. The sales manager reports that the maximum sales will be as follows:
Date posted: February 21, 2019. Answers (1)
- Sifa Ltd. manufactures and sells a single product. The following information regarding the
company for the year ended 31 October 2014 is provided:(Solved)
Sifa Ltd. manufactures and sells a single product. The following information regarding the
company for the year ended 31 October 2014 is provided:
The following changes are expected to occur during the year ending 31 October 2015:
1. Variable selling and distribution expenses will reduce by 5% due to increased efficiency of the
sales staff.
2. Variable overheads will increase by 3%.
3. Labour cost will reduce by 4%.
4. Material cost will increase by 2% due to inflation.
5. Selling price will reduce by 3% in order to attract customers.
6. No stock is expected at the end of the period.
Required;-
i) Expected break even sales for the year ending 31 October 2015.
ii) Expected margin of safety in sales value for the year ending 31 October 2015.
iii) Expected sales value at which a profit of Sh.2, 250,000 will be realised.
iv) A summary of the operating statement to show net profit in (b) (iii) above.
Date posted: February 21, 2019. Answers (1)
- Kenya Industrial Chemical limited (KICL) produces an industrial chemical branded Alpha. During the
production process a by-product Beta and a toxic waste T are also produced.
During...(Solved)
Kenya Industrial Chemical limited (KICL) produces an industrial chemical branded Alpha. During the
production process a by-product Beta and a toxic waste T are also produced.
During the month of October 2005, KICL recorded the following information in relation to the
production process.
Additional Information:
1. The toxic waste T is produced at the final production stage. KICL incurs sh. 80 to dispose of a
litre of T
2. Beta is transferred to a subsequent operation where it is packed at a cost of sh.25 per litre
This cost has not been included in the direct materials and conversion costs shown above.
During the month of October 2005, 300 litres of Deta were sold at a retail price of sh. 75 per litre
3. If is the company's policy to credit the account with the net realizable value of Beta produced
4. The normal output from the production process per 10,000 litres of direct materials is;
Required:
a) Prepare the following accounts for the month of October 2005
i. Process account
ii. By-product
iii. Normal loss account (toxic waste)
iv. Abnormal loss account (toxic waste)
b) Determine the abnormal gain or loss products A,B
Date posted: February 21, 2019. Answers (1)
- Jitegemee limited company uses a process costing system in its operation. In one of the production processes, two joint products A and B and a...(Solved)
Jitegemee limited company uses a process costing system in its operation. In one of the
production processes, two joint products A and B and a by-product C are produced
The following additional information is provided:
1. Each processing run requires 12,500 kilograms of output.the costs incurred are as follow:-
2. It is expected that 20% of the input will be damaged in the production process. This is sold as
scrap at sh. 10 per kilogram. The damaged items are detected at the end of the production
process.
3. The output from the production process is as follows:-
4. Product A has to be processed further at a cost of sh. 100 per kilogram before sale
5. The joint costs are allocated to the products on the basis of net releasable value
Required:
i. Determine the total cost of the output from the production process
ii. Calculate the allocated joint costs for product A and product B
iii. Prepare a process account for the production process above
Date posted: February 21, 2019. Answers (1)
- Go easy Limited crushes and refines mineral one into three products in a joint cost operation.
Costs and production for 1991 were as follows:-(Solved)
“Go easy” Limited crushes and refines mineral one into three products in a joint cost operation.
Costs and production for 1991 were as follows:-
Department X:
Initial joint costs sh. 2,100,000 producing 100,000 kilograms of Alco,
300,000 kilograms of Devo and 500,000 kilograms of Holo
Department Y: Processes Alco further at a cost of sh. 500,000
Department Z: Processes Devo further at a cost of sh. 1,000,000
Results 1991
Alco 180,000 kilograms completed; 95,000 kilograms sold for sh. 100 per
kilogram; Final inventory 5,000 kilograms
Devo: 300,000 kilograms completed; 295,000 kilograms sold for sh. 30 per
kilogram; final inventory 5,000 kilograms
Holo: 500,000 kilograms completed; 495,000 kilograms sold for sh. 5 per
kilograms; final inventory 5,000 kilograms; Holo required no further
processing
Required:
a) Use the net realizable –value method to allocate the joint costs of the three products
b) Compute the total costs and unit costs of ending inventories
Date posted: February 21, 2019. Answers (1)
- The West Africa Industries Limited buys crude vegetable oil: The refining of these oils results in four
products A, B and C which are liquids and...(Solved)
The West Africa Industries Limited buys crude vegetable oil: The refining of these oils results in four
products A, B and C which are liquids and D which is a heavy residue. The cost of the oil refined in
1992 was sh. 1,104,000 and the refining department had total processing costs of sh. 2,800,000. The
output and sales for the four products in 1992 were as follows:-
Required:
a) Assume that the next realizable value of allocating joint is used. What is the net income for
products A, B C and D? Joint cost total sh. 3,904,000
b) The company has been tempted to sell at split-off directly to other processors. If the alternative
had been selected, sales per litre would have been A, sh. 150, B sh. 5, C sh. 8 and D sh.30. What
would the net income be for each product under these alternatives?
Date posted: February 21, 2019. Answers (1)
- The following information is obtained in respect of process 2 of the month of September;(Solved)
The following information is obtained in respect of process 2 of the month of September;
There was a normal loss in the process of 10% of production units' scrapped realized sh. 50 per unit,
use FIFO method
Required:
i. Statement of production
ii. Statement of cost and evaluation
iii. Process account
iv. Abnormal loss / gain account
Date posted: February 21, 2019. Answers (1)
- a) Calculate the cost of completed units transferred to process 3
b) Calculate the value of closing WIP
c) Show (i) Process 2 account
(ii) Abnormal Gain account(Solved)
Required:
a) Calculate the cost of completed units transferred to process 3
b) Calculate the value of closing WIP
c) Show (i) Process 2 account
(ii) Abnormal Gain account
Date posted: February 21, 2019. Answers (1)
- The following data is shown in respect to month of August for process 3(Solved)
The following data is shown in respect to month of August for process 3
Required:
Using weighted average method show relevant accounts
Date posted: February 21, 2019. Answers (1)
- Kenya chemical industries limited, process a range of products including bleaching detergent which
passes three processes before completion and transferred to finished goods store. The following
information...(Solved)
Kenya chemical industries limited, process a range of products including bleaching detergent which
passes three processes before completion and transferred to finished goods store. The following
information was extracted from the books of the company for the month of October.
Date posted: February 21, 2019. Answers (1)
- Pakawa Ltd. employs five processes to manufacture a hybrid fertilizer branded 'Sunshine'.
The data below relates to process C for the month of October 2005:(Solved)
Pakawa Ltd. employs five processes to manufacture a hybrid fertilizer branded 'Sunshine.
The data below relates to process C for the month of October 2005:
Material costs are added to the product as the end of the process and conversion costs are assumed to
be incurred uniformly throughout the process. Manufacturing overhead is applied to the product on
the basis of 50 per cent of labour cost.
Additional information:
1. Units lost during processing are considered to be a normal occurrence unless the numbers of lost
units exceed 5 per cent of total units accounted for. The cost of normal loss is absorbed by the cost
of total units accounted for.
2. Lost units in excess of 5 per cent are considered abnormal. This cost is separately identified and
written off as a loss. The company cost accounts follow a policy of assigning only transferred-in
costs to abnormally lost units.
Required:
Using the FIFO method of valuing inventory, prepare process C statement for the month of October
2005 showing:
(i) Total cost assigned to good units and transferred to process D.
(ii) Total loss due to abnormal lost units.
(iii) Valuation of closing work-in-progress in total and by elements of cost
(d) Identify the causes of losses in process costing
Date posted: February 21, 2019. Answers (1)
- (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)