The Taranaki Milk Products Company manufactures products which pass through three processes. The costing records for processes 1 and 2 give the following information.

Further information 

Process 1. There were no opening or closing stocks of work in progress. All production from this process was passed to process 2.

Process 2. There was no opening stock of work in progress. There was a closing stock of work in progress consisting of 2000 units which were complete as to 80% materials and 60% labour. 

Required 

(a) Prepare the accounts for processes 1 and 2. 

(b) Calculate the cost of:

(i) One completed unit of production in process 1 

(ii) One completed unit of production in process 2 

(iii) One unit of work in progress in process 2. 

10 000 units from process 2 were used in process 3 as a result of which two joint products X and Y were produced. The costs of this process were as follows: materials $9050; labour $18 500; variable overheads $5400; fixed overheads $10 800. 

10% of production in process 3 was spoiled. X represented 75% of the good production, and Y the remainder. There were no opening or closing stocks of work in progress.

(c) Calculate the quantities of 

(i) X 

(ii) Y 

produced in process 3. 

(d) Calculate the cost of each unit of output of process 3. 

(e) Calculate the values of the finished stocks of 

(i) X 

(ii) Y.

(f) 

(i) Explain what is meant by a by-product. 

(ii) State how by-products are accounted for in process cost accounting.

Transcribed Image Text:

Materials per unit Cost of materials per kg/litre Materials used in process at cost Additional materials used in process Direct labour per unit Labour cost per hour Variable overhead per unit Fixed overhead absorption rate Process 1 2 litres $1.25 $60 000 30 minutes $12 $5 per direct labour hour $9 per direct labour hour Process 2 1 litre $1.5 to be calculated 15 minutes $12 $4 per direct labour hour $6 per direct labour hour