Question 7 (20 Marks)

A manufacturing company operates two processes. Output from Process 1 is transferred as input to Process 2. Output from Process 2 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 (Process 2)	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 process and conversion costs are incurred at a constant rate throughout processing. The closing work-in-progress in Process 1 at the end of January 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 of processing in Process 2, but the added materials are introduced at the end of the process. Conversion costs are incurred at a constant rate throughout processing. The closing work-in-progress in Process 2 at the end of January is estimated to be 50% complete.

Required:

Calculate:

a) the cost of completed output from Process 1 and Process 2.

b) the cost of the closing work-in-process in each process at the end of January.

c) Prepare the Process 1 account and the Process 2 account for January.