Chempaka Sdn. Bhd. produces a chemical product which goes through two processes. The output from Process 1 is transferred to Process 2, where further material is added before it becomes finished goods. The details of the process costs of the company for first quarter of year 2020 were shown as below: Process 1 Direct material 54,000 kg at RM2.80 per kg Direct labour 28,500 hours Production overhead 150% of direct material cost Actual output 50,000 kg Process 2 Direct material added 30,000 kg at RM4 per kg Direct labour 18,000 hours Direct expenses RM5,000 Production overhead RM6.40 per direct labour hour Finished goods 74,800 Additional information: 1. Direct labours are paid at the rate of RM4.00 per hour. 2. Losses are expected to be 10% of the total input for Process 1 and 5% of the total input for Process 2. 3. Normal loss from Process 1 was sold as scrap at RM0.80/kg and normal loss from Process 2 was sold at RM2.30/kg, for both of which immediate payment was received. Required: a. Prepare Process 1 and Process 2 Accounts of the company. b. Normal Loss Account c. Abnormal loss/ Gain account (if any)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Chempaka Sdn. Bhd. produces a chemical product which goes through two processes. The output from Process 1 is transferred to Process 2, where further material is added before it becomes finished goods. The details of the
Process 1
Direct material 54,000 kg at RM2.80 per kg
Direct labour 28,500 hours
Production overhead 150% of direct material cost
Actual output 50,000 kg
Process 2
Direct material added 30,000 kg at RM4 per kg
Direct labour 18,000 hours
Direct expenses RM5,000
Production overhead RM6.40 per direct labour hour
Finished goods 74,800
Additional information:
1. Direct labours are paid at the rate of RM4.00 per hour.
2. Losses are expected to be 10% of the total input for Process 1 and 5% of the total input for Process 2.
3. Normal loss from Process 1 was sold as scrap at RM0.80/kg and normal loss from Process 2 was sold at RM2.30/kg, for both of which immediate payment was received.
Required:
a. Prepare Process 1 and Process 2 Accounts of the company.
b. Normal Loss Account
c. Abnormal loss/ Gain account (if any)
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