Question 1

JTS Limited operates a process in which there is opening and closing work in progress. At the start of June, opening work in progress consisted of 7,500 units which were 60% complete with respect to materials. 42,000 units of finished production were completed during June. At the end of the month, there were 8,000 units of work in progress which were 80% complete with respect to materials. What is the number of equivalent units of material added to the process during the month of June using the first in, first out method of valuing finished production and closing work in progress?

Accepted Answer

The calculation for equivalent units of material added during June, using the FIFO method, involves accounting for the completion of opening work in progress, the total units completed, and the closing work in progress. 1. Complete the opening work in progress: 7,500 units were 60% complete, so 40% of the material work was needed to complete them. This equals 7,500 units * 40% = 3,000 equivalent units.2. Add the units fully completed during the month (excluding those from opening WIP): 42,000 units were completed, but we need to subtract the opening WIP units that were completed, so 42,000 - 7,500 = 34,500 units. These units are 100% complete, so they add 34,500 equivalent units.3. Calculate the material added to the closing work in progress: 8,000 units were 80% complete, which equals 8,000 * 80% = 6,400 equivalent units.4. Add these together to find the total equivalent units of material added during June: 3,000 (from opening WIP completion) + 34,500 (units fully completed during the month) + 6,400 (from closing WIP) = 43,900 equivalent units.Therefore, the correct answer is 43,900 equivalent units of material added during the month of June.

Question 2

Which one of the following statements is false?

Accepted Answer

Normal losses are expected as part of the production process and their cost is absorbed by the good units produced, not added back to the input material. They are accounted for by reducing the output, not by adjusting the input side of the process account.

Question 3

TFP Limited operates a process costing system and uses the first in first out method when valuing closing work in progress and finished units of production. During the month of August, 31,300 equivalent units of material were used in the process. The 2,000 units of opening work in progress were 60% complete with respect to materials. At the end of August, work in progress consisted of 5,000 units which were 50% complete with respect to materials. How many units of production were started and completed during the month of August?

Accepted Answer

To calculate the units started and completed, we first determine the equivalent units for materials for the month, then adjust for the opening and closing work in progress (WIP). The calculation is as follows:1. Total equivalent units of material used = 31,300 units.2. Opening WIP (2,000 units) was 60% complete, so the equivalent units for these would be 2,000 units * 40% (since 60% was completed in the previous period, we only count the remaining 40% needed to complete these units in the current period) = 800 units.3. Closing WIP consists of 5,000 units 50% complete with respect to materials, so the equivalent units for these are 5,000 units * 50% = 2,500 units.4. The equivalent units for materials used to start and complete units this period = Total equivalent units - Adjustment for opening WIP + Adjustment for closing WIP = 31,300 - 800 + 2,500 = 33,000 units.5. However, to find the units started and completed, we subtract the closing WIP (since they are not completed) from the total equivalent units after adjusting for the opening WIP: 33,000 - 5,000 = 28,000 units.Therefore, 28,000 units were started and completed during the month of August.

Question 4

Which one of the following statements is not true?

Accepted Answer

Abnormal losses are indeed given a value in the process account. They are treated differently from normal losses, which are expected and accounted for in the cost of production. Abnormal losses, being unexpected, are valued and shown separately in the accounts to highlight inefficiencies or issues in the production process.

Question 5

Chuggles Limited makes soft drinks. During November, the company produced 30,000 litres of finished product. Opening work in progress at 1 November was 5,000 litres which were 65% complete with respect to materials. At 30 November, there were 4,000 litres of product which were 70% complete with respect to materials. Chuggles Limited uses the weighted average cost method to value finished goods and closing work in progress. What were the equivalent units of material used in the soft drinks process during November?

Accepted Answer

The answer of Chuggles Limited makes soft drinks. During November,...

Question 6

A process incurs total costs in October of £483,840. Total inputs of material to the process amounted to 6,000 units. At the end of October, 5,400 units of finished production had been completed at a cost of £453,600. At 31 October there were 600 units of work in progress with a cost of £30,240. There was no work in progress in the process at 1 October. What is the % completion of the closing work in progress in the process?

Accepted Answer

The answer of A process incurs total costs in October...

Question 7

PCJ Limited operates a process costing system. At the start of July, work in progress (WIP) of 500 units was 60% complete with respect to materials and had a cost of £1,150. 5,000 units of product were transferred to finished goods during July. At the end of July, WIP consisted of 600 units of product which were 50% complete with respect to materials. Materials costs incurred by the process during July were £20,050. PCJ Limited uses the first in first out (FIFO) method when valuing closing work in progress and finished goods. How much materials cost is included in the production cost of goods transferred to finished goods during July?

Accepted Answer

The answer of PCJ Limited operates a process costing system....

Question 8

PJS Limited produces liquid industrial cleaners. At 1 December, work in progress consisted of 800 litres of product which were 75% complete with respect to materials and 60% complete with respect to labour and overhead. 8,000 litres of liquid industrial cleaner were produced during December and transferred to the finished goods store. At 31 December, work in progress consisted of 600 litres of product which were 40% complete with respect to materials and 30% complete with respect to labour and overhead. PJS uses the weighted average cost valuation method to value units of work in progress and finished goods. What were the equivalent units of material and conversion costs to be applied in determining the cost of finished goods and work in progress in December?

Accepted Answer

Material: Opening WIP (800 litres * 75%) + Production (8,000 litres) + Closing WIP (600 litres * 40%) = 600 + 8,000 + 240 = 8,840 equivalent units. Conversion: Opening WIP (800 litres * 60%) + Production (8,000 litres) + Closing WIP (600 litres * 30%) = 480 + 8,000 + 180 = 8,660 equivalent units. The correct answer is not listed, indicating a possible mistake in the calculation or the provided options.

Question 9

TKC Limited operates a process costing system. At 1 June, work in progress (WIP) of 800 units was 50% complete with respect to materials, labour and overhead and had a cost of £16,800. 6,200 units of product were transferred to finished goods during June. At the end of the month, WIP consisted of 250 units of product which were 80% complete with respect to materials, labour and overhead. Costs incurred by the process during June were £268,800. TKC Limited uses the weighted average cost method when valuing closing work in progress and finished goods. What was the production cost of goods transferred to finished goods during June?

Accepted Answer

The answer of TKC Limited operates a process costing system....

Question 10

BKY Limited produces advanced lubricants. The company uses a process costing system to determine costs for work in progress and finished goods production. At 1 May, there were 250 litres of advanced lubricant work in progress with a value of £1,560. This opening work in progress was 80% complete with respect to all costs incurred in the advanced lubricant production process. During May, 3,000 litres of advanced lubricant were completed and transferred to finished goods. The cost per equivalent unit for costs incurred during May was £8. The company uses the first in first out method to allocate costs to finished goods and closing work in progress. What was the total production cost of the 3,000 units transferred to finished goods in May?

Accepted Answer

The total production cost of the 3,000 units transferred to finished goods in May is calculated as follows:1. Calculate the cost to complete the opening work in progress (WIP):   - Opening WIP: 250 litres at 80% complete means 20% of the costs are still to be incurred.   - Cost to complete opening WIP = 250 litres * 20% * £8 = £400.2. Calculate the cost of the new production during May:   - 3,000 litres were completed, but we need to exclude the opening WIP to find the cost of new production only.   - New production = 3,000 litres - 250 litres = 2,750 litres.   - Cost of new production = 2,750 litres * £8 = £22,000.3. Add the cost to complete the opening WIP to the cost of new production:   - Total production cost = £400 (to complete opening WIP) + £22,000 (new production) + £1,560 (value of opening WIP) = £23,960.

Question 11

Which one of the following statements is false?

Accepted Answer

Disposal costs of waste products from a process are not income for a business; they are expenses. The statement incorrectly suggests that costs associated with disposing of waste generate income, which is not true. Costs are outflows or obligations to transfer resources as a result of past transactions, not income.

Question 12

Whimper Chemicals Limited has started a new process producing silent explosives. During the month of April, 10,000 units of material were input to the process at a cost of £20,000. Labour costs incurred in the month were £11,600 and overheads added to the process totalled up to £6,032. Normal losses from the process are 2% of input materials. 9,100 units of finished production were transferred to finished goods stores during the month. At 30 April, there were 800 units of work in progress (WIP) which were 75% complete with respect to materials, labour and overhead. What is the cost per equivalent unit that will be used in valuing finished production, work in progress, abnormal gains and abnormal losses in the silent explosives process?

Accepted Answer

The total cost is £37,632 (£20,000 materials + £11,600 labour + £6,032 overheads). Equivalent units are calculated as follows: 9,100 finished units + 800 WIP units * 75% = 600 equivalent units. Normal loss is 2% of 10,000 = 200 units. Total equivalent units = 9,100 + 600 + 200 = 9,900. Cost per equivalent unit = £37,632 / 9,900 = £3.92.

Question 13

At 1 January, ACB Limited had 800 litres of solvent that were 80% complete with respect to all inputs of material, labour and overhead. This opening work in progress was valued at £4,200. During January, 12,000 litres of material were input to the process. Total costs for January for materials, labour and overhead amounted to £79,200. Normal loss from the process is 4% of input materials. During the month 11,320 litres of finished solvent were transferred to the next process. Work in progress at the end of the month amounted to 1,000 litres which were 32% complete with respect to materials, labour and overhead. There were no abnormal gains or losses in the process during January. ACB Limited values output and closing work in progress from its solvent process using the first in first out method of valuation. What is the value of closing work in progress at the end of January?

Accepted Answer

The answer of At 1 January, ACB Limited had 800...

Question 14

SPM Limited produces paints. The company process costing system works on a first in first out basis in determining the costs of work in progress and finished goods production. At 1 June, there were 500 litres of work in progress with a value of £3,600. This opening work in progress was 75% complete with respect to all costs incurred in the paint production process. By the end of June, the total cost of paint transferred to finished goods was £49,850. The cost per equivalent litre of production for the month was £10 and there was no closing work in progress in the paint production process at 30 June. How many litres of paint were transferred to finished goods in June?

Accepted Answer

To find the number of litres transferred to finished goods, we first calculate the total cost of production for June, including the cost to complete the work in progress at the start of the month. The opening work in progress was 75% complete, meaning an additional 25% of costs were needed to complete it. The cost to complete the opening work in progress is 25% of £3,600, which is £900. Adding this to the total cost transferred to finished goods (£49,850) gives a total cost of £50,750 for June. Dividing this by the cost per equivalent litre (£10) gives 5,075 litres. However, this includes the 500 litres from the opening work in progress, so the litres transferred to finished goods are 5,075 - 500 = 4,575 litres. The correct answer is not explicitly listed, indicating a potential mistake in calculation or interpretation. Given the options, the closest correct approach would involve recalculating based on the provided choices, but without a direct match, the explanation points towards a calculation error. The correct approach involves calculating the total cost, dividing by the cost per litre, and adjusting for the opening work in progress, but the discrepancy suggests a reevaluation of the calculation steps or options provided.

Question 15

At 1 March, TFP Limited had 2,000 litres of liquid fertiliser that were 60% complete with respect to all inputs of material, labour and overhead. This opening work in progress (WIP) was valued at £5,692. During March, 20,000 litres of material were input to the process. Total costs for March for materials, labour and overhead amounted to £82,500. During the month 20,000 litres of liquid fertiliser were transferred to finished goods. Work in progress (WIP) at the end of the month amounted to 2,000 litres which were 40% complete with respect to materials, labour and overhead. TFP Limited values output and work in progress (WIP) from its liquid fertiliser process using the weighted average cost valuation method. What is the value of closing work in progress (WIP) using the weighted average cost method at the end of March?

Accepted Answer

The weighted average cost per litre is calculated by adding the opening WIP cost (£5,692) to the total costs for March (£82,500) and dividing by the total equivalent units (22,000 litres). The closing WIP is 2,000 litres at 40% completion, so the equivalent units for closing WIP are 800 litres. The value of closing WIP is 800 litres multiplied by the weighted average cost per litre.

Question 16

Which one of the following statements is false?

Accepted Answer

Abnormal losses are indeed accounted for in the process account, but they are not simply debited there. Instead, they are treated as part of the cost of production and are typically credited to the process account and debited to an abnormal loss account, reflecting their nature as losses exceeding the normal expected losses. The statement as provided suggests an oversimplified and inaccurate representation of how abnormal losses are accounted for in process costing.

Question 17

At 1 July, AFB Limited's oil refining process had 400 litres of work in progress valued at £8,930. This work in progress was 70% complete with respect to materials and 50% complete with respect to conversion costs. The cost of opening work in progress was made up of £5,978 of materials cost and £2,952 of conversion costs. During the month, 2,500 litres of material were added to the process at a cost of £52,460 for materials and £36,900 for conversion costs. Output from the oil refining process in June was 2,600 litres. Work in progress at 30 June consisted of 300 litres which were 40% complete with respect to materials and 20% complete with respect to conversion costs. AFB Limited uses the first in first out (FIFO) method to value work in progress (WIP) and finished units of output. What is the value of work in progress in the oil refining process at 30 June?

Accepted Answer

The value of work in progress in the oil refining process at 30 June is £3,480. This is calculated as follows:Opening work in progress:Materials cost: £5,978 x 70% = £4,185Conversion costs: £2,952 x 50% = £1,476Total opening work in progress: £4,185 + £1,476 = £5,661Work in progress added during the month:Materials cost: £52,460Conversion costs: £36,900Total work in progress added during the month: £52,460 + £36,900 = £89,360Total work in progress: £5,661 + £89,360 = £95,021Closing work in progress:Materials cost: £89,360 x 40% = £35,744Conversion costs: £89,360 x 20% = £17,872Total closing work in progress: £35,744 + £17,872 = £53,616Therefore, the value of work in progress in the oil refining process at 30 June is £53,616.

Question 18

Which one of the following statements is false?

Accepted Answer

Abnormal gains do not reduce the units of normal losses reported in the process account. Instead, they are treated as additional output and are accounted for separately, showing that the actual loss was less than the anticipated or normal loss.

Question 19

Late N Tyle Limited makes treacle. At the start of November, there were 5,000 litres of work in progress which were 60% complete in respect of all inputs. Opening work in progress was valued at £2,000. During the month, 101,000 litres of treacle were produced. Materials for the month cost £61,250 and conversion costs for the month amounted to £10,910. At the end of November, there were 2,500 litres of work in progress which were 80% complete in respect of all inputs. Late N Tyle Limited uses the weighted average cost method to value work in progress and finished goods. What is the value of closing work in progress that Late N Tyle will record in the process account for November?

Accepted Answer

The answer of Late N Tyle Limited makes treacle. At...

Question 20

Which one of the following statements is false?

Accepted Answer

Abnormal gains increase the unit cost of finished production from a process in the month in which the abnormal gain is realized.

Quiz 4: Process Costing, and Capital Investment Appraisal

Which one of the following statements is false?

Which one of the following statements is not true?

Which one of the following statements is false?

Which one of the following statements is false?

Which one of the following statements is false?

Which one of the following statements is false?