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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:

      

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:
dwv2212019252.png

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

  

Answers


Martin
loff2212019255.png

Causes of losses in process costing

(i). Unavoidable handling, breakage and spoilage losses

(ii). Withdrawal for testing and inspection.

(iii). Evaporation, residuals
marto answered the question on February 21, 2019 at 10:56


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