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Question 7 (20 Marks)
A manufacturing company operates two processes. Output fromProcess 1 is transferred as input to Process 2. Output from Process2 is the finished product.
Data for the two processes in January are as follows:Process 1
Opening work in process
Nil
Units introduced into the process
14,000
Units completed and transferred to the next process (Process2)
10,000
Closing work-in-progress
4,000
Material cost added during the period
R70,000
Conversion cost added during the period
R48,000
Materials are input into Process 1 at the start of the processand conversion costs are incurred at a constant rate throughoutprocessing. The closing work-in-progress in Process 1 at the end ofJanuary is estimated to be 50% complete for the conversion work
Process 2
Opening work-in-process
Nil
Units transferred into the process from Process 1
10,000
Closing work-in-progress
1,000
Units completed and transferred to finished goods inventory
9,000
Costs for the period:
Cost of production transferred from Process 1
R90,000
Conversion cost added during the period
R57,000
Added materials during Process 2
R36,000
The materials from Process 1 are introduced at the start ofprocessing in Process 2, but the added materials are introduced atthe end of the process. Conversion costs are incurred at a constantrate throughout processing. The closing work-in-progress in Process2 at the end of January is estimated to be 50% complete.
Required:
Calculate:
a) the cost of completed output from Process 1 and Process2.
b) the cost of the closing work-in-process in each process atthe end of January.
c) Prepare the Process 1 account and the Process 2 account forJanuary.