Shown below is the previous month’s operating data for Process 3, the final manufacturing operation in the production of standard sized insulation blocks.

Work in Progress

Opening stock 400 blocks, total cost £1,000

Closing stock 500 blocks

The degree of completion of both opening and closing stocks of work-in-progress was:

Process 2 materials                     100%

Additional materials                     80%

Conversion costs                           60%

During the month 4,500 blocks were transferred from Process 2 at a total cost of £9,000. Other costs charged to Process 3 during the month were:

Materials                                       £4,360

Labor and overhead                    £2,125

Process inspection occurs when the output is 100% complete for Process 2 material, 60$ complete for additional materials and 30% complete for conversion costs and normally no losses are expected at this stage. However, during the month 300 blocks were rejected at inspection and sold as scrap for £1 each.

The company operates the first in, first out method of charging opening stocks to production:

Required:

Prepare the Process 3 account and an abnormal loss account recording the data shown above. Include a detailed working paper showing all your calculations.