A company has a continuous process, making components that are partially used in the company’s own products and partially sold on to other industrial customers.

 The company uses the Weighted Average method of process costing.

The process has an expected normal wastage of 5% based on the material introduced. This wastage is detected on completion.

 For the month of April the following activity occurred:

 Opening work in progress: 6000 Units

	£
Material 100% complete	42,000
Labour and overheads 40% complete	48,000

 During the month the following resources were used:

	£
Material for 80,000 units was introduced	640,000
Labour and overheads cost	1,760,000

 During of the month: 

Units completed and transferred:              50,000 units

Units completed and sold to customers:    24,000 units @ £50 selling price

 Closing work in progress: 3000 Units 

Material 100% complete

Labour and overheads 60% complete

 

Required:

a)   Calculate the abnormal gain or loss in units for April.                           

b)   Calculate the cost per equivalent unit using the Weighted Average method.

c)    Show the process account, for the month of May allocating the costs appropriately to:
            Finished goods completed and transferred.

          Finished goods completed and sold

          Amounts transferred to gains and losses account

          Closing work in progress.    

d)  Calculate the manufacturing profit made on the sold units.   

e)  Briefly explain how the costs you have calculated are used in decision-making in the company.