Question $3$

a$)$ In the context of Process Costing, define

i$)$ Normal loss

ii$)$ Abnormal loss

State the treatment of both in a system of process accounts.

$(6$ marks$)$

b$)$ State the three methods that are commonly used to apportion joint processing costs over joint products that emerge from a single process.

$(7$ marks$)$

Question $4$

Mutenda Ltd produces three products $x,Y$ and Z in a single process. There is a normal loss in the process of $10\%$ of input, and the products emerge in the ratio of $x5$ : $Y3$ : $Z2.$

For a typical month, the following budgeted figures are available:

Material input $,100,000$ kilos $$3$ per kilo

Labour $,5,000$ hours $$8$ per hour

Variable overhead $5,000$ hours $$4$ per hour

Fixed overhead is absorbed at $50\%$ of labour cost.

There is no abnormal loss. The normal loss is sold for scrap at $$2$ per kilo, this being credited to the process account.

There was no opening or closing work$-$in$-$progress.

The products sell for $,x$ per kilo

Y $$5$ per kilo

Z $$7\mathrm{.}5$ per kilo

You are required to

a$)$ Calculate separately the cost of each of $x,Y$ and $Z,$ using the following methods to apportion the joint processing costs, working to the nearest $ :

i$)$ Relative weight of output

ii$)$ Sales value of output

$(13$ marks$)$

b$)$ Each of $x,Y$ and $Z$ can be converted by a further process into $xx,YY$ and $ZZ$ respectively.

The selling prices would be $xx$$$7$ per kilo, YY $$7$ per kilo and $ZZ$$$8\mathrm{.}2$ per kilo. The further processing would cost $$0\mathrm{.}5$ per kilo input. There would be a normal loss in the further processing of $10\%$ of material input, which would have no sales value.

State with supporting figures which $($if any$)$ of the products $x,Y$ and Z should be converted into $xx,YY$ and $ZZ$

$(12$ marks$)$