Susan Company produces a product called ‘N96’ which required to go through two processes, Process 1 and Process 2. The following information relates to Process 2 for the month of March 2020:

It is the company’s policy to adopt FIFO method in its process costing system.

(a) Briefly explain how the adoption of a lean manufacturing approach affects process costing.

(b) ‘Normal loss is included in the cost of good output units, while abnormal loss is recorded as a period cost. Comment on this statement
 

Transcribed Image Text:

Units Percent Completed Materials Conversion Work-in-process, 1 March 21,000 84,000 73,500 80% 60% Transferred from Process 1 and started in Process 2 Completed and transferred out Work-in-process, 31 March 31,500 30% 40% Materials ($) Transferred-in from Process 1 ($) 120,000 Costs for March Conversion ($) Work-in-process, 1 March Added during the month 19,000 17,000 183,750 462,000 264,600 Units Percent Completed Materials Conversion Work-in-process, 1 March 21,000 84,000 73,500 80% 60% Transferred from Process 1 and started in Process 2 Completed and transferred out Work-in-process, 31 March 31,500 30% 40% Materials ($) Transferred-in from Process 1 ($) 120,000 Costs for March Conversion ($) Work-in-process, 1 March Added during the month 19,000 17,000 183,750 462,000 264,600

Answer rating: 100% (QA)

a This is because under lean accounting its purpose is to tell us about the f... View the full answer