Process Costing – Page 2

MI – Nov 2020 – L1 – SA – Q7 – Costing Methods

Calculate the quantity of goods production given wastage and abnormal loss.

Question

A chemical process has a normal wastage of 10% of input in a period. A quantity of 2,500kg of material was introduced, and there was an abnormal loss of 75kg.

What quantity of goods production was achieved?

A. 2,175 kgs

B. 2,250 kgs

C. 2,325 kgs

D. 2,425 kgs

E. 2,625 kgs

Answer

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Tags: Abnormal Loss, Process Costing, Wastage
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

MI – Nov 2020 – L1 – SA – Q5 – Costing Methods

Identify an incorrect statement about marginal costing in process costing.

Question

When marginal costing is used in process costing, which of the following is NOT correct?

A. Process accounts will contain variable costs only

B. Equivalent units are valued at variable cost

C. Transfer from one process to another will be at total costs of the process

D. Losses, abnormal and normal will be valued at variable cost only

E. All fixed costs will be written off, each period, to costing profit or loss

Answer

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Tags: Marginal Costing, Process Costing, Variable Costs
Level: Level 1

Topic: Costing Methods
Series: NOV 2020

MI – Nov 2015 – L1 – SA – Q9 – Costing Methods

Calculates the quantity of good production after accounting for normal and abnormal losses.

Question

XYZ is a chemical processing company with 25,000kg input materials. The company has a normal loss of 10% and an abnormal loss of 750kg. What quantity of good production will be achieved in kg?
A. 24,250
B. 23,250
C. 22,500
D. 21,750
E. 20,750

Answer

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Tags: Abnormal Loss, Normal Loss, Process Costing
Level: Level 1

Topic: Costing Methods
Series: NOV 2015

MI – May 2018 – L1 – SB – Q1 – Costing Methods

Preparation of process, abnormal loss, and abnormal gain accounts for Queensly Nigeria Limited.

Question

The following data is compiled from the operations of QUEENSLY NIGERIA LIMITED in respect of their sole product:

	Process 1	Process 2
Material introduced (Kgs)	8,000	2,000
Labour costs (N)	12,000	8,000
Material cost per kg (N)	10	15
Expenses (N)	20,000	15,000
Normal loss (%)	10	15
Output (Kgs)	6,800	7,700

You are required to:

Draw up the process, abnormal loss, and abnormal gain accounts.

Answer

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Tags: Abnormal Gain, Abnormal Loss, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2018

MI – May 2018 – L1 – SA – Q8 – Costing Methods

Equivalent units and costing method classification.

Question

The term ‘equivalent units’ features under which of the following?
A. Contract Costing
B. Process Costing
C. Standard Costing
D. Job Costing
E. Batch Costing

Answer

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Tags: Equivalent Units, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2018

MI – May 2022 – L1 – SA – Q2 – Costing Methods

Impact of ignoring equivalent units for normal loss in process costing.

Question

In process costing, ignoring equivalent units for normal loss has which of the following effects?

A. Decreases equivalent units and increases the cost per unit
B. Increases equivalent units and increases the total cost
C. Increases total cost and decreases the cost per unit
D. Increases the cost of work in progress and decreases the cost of finished products
E. Increases the cost of completed units and decreases work in progress

Answer

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Tags: Equivalent Units, Normal Loss, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2022

MI – May 2021 – L1 – SA – Q7 – Costing Methods

Identify the correct definition of abnormal gain in costing.

Question

Abnormal gain is calculated as:

A. Unexpected profit from price increase due to sudden jump in demand
B. Profit from sale of fixed assets
C. Normal loss minus actual loss
D. Donations and subventions received unexpectedly
E. Profit realised outside the normal course of business

Answer

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Tags: Abnormal Gain, Costing, Loss, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2021

MI – May 2021 – L1 – SA – Q6 – Costing Methods

Identify the concept not associated with process costing.

Question

Which of the following is NOT associated with process costing?

A. Normal loss
B. Abnormal loss
C. Abnormal gain
D. Equivalent units
E. Cost of goods sold

Answer

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Tags: Abnormal Loss, Costing, Normal Loss, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2021

MI – May 2023 – L1 – SB – Q1 – Costing Methods

Preparation of Process 1 and Process 2 accounts, including the cost of goods produced and applicable abnormal loss or gain.

Question

A company manufactures a product which goes through two processes. The following are the extracts from the company’s records:

Process 1:

Materials: 10,000 units at the cost of ₦100,000
Labour: ₦20,000
Overheads: ₦20,000
Normal loss: 10%
Actual production: 8,500 units
Scrap sales: ₦5 per unit

Process 2:

Transfer from process 1: 8,500 units valued at ₦127,500
Labour: ₦15,000
Overheads: ₦10,000
Normal loss: 10%
Actual production: 8,400 units
Scrap sales: ₦3 per unit

Required:
a. Prepare Process 1 account. (10 Marks)
b. Prepare Process 2 account. (10 Marks)

(Show the calculations of cost of goods produced and applicable abnormal loss or gain.)

Answer

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Tags: Abnormal Loss, Normal Loss, Process Costing, Production Costs
Level: Level 1

Topic: Costing Methods
Series: MAY 2023

MI – May 2017 – L1 – SA – Q7 – Costing Techniques

Identify the costing method used for mass production.

Question

Question:
A situation in which there is mass production of identical units of products and costs are not necessarily assigned to individual units of output is known as:
A. Job costing
B. Step costing
C. Joint costing
D. Process costing
E. Batch costing

Answer

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Tags: Cost Allocation, Mass Production, Process Costing
Level: Level 1

Topic: Costing Techniques
Series: MAY 2017

MI – May 2017 – L1 – SA – Q3 – Costing Methods

Identify the element not used in process costing.

Question

Which of the following is NOT used in process costing?
A. Equivalent units
B. Progress payments
C. Abnormal loss
D. Material introduced
E. Scraps

Answer

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Tags: Abnormal Loss, Cost Management, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2017

MI – May 2015 – L1 – SB – Q2 – Costing Methods

Prepare process accounts, normal loss account, and abnormal gain account for Maputo Nigeria Limited for Process 2 and Process 3.

Question

MAPUTO NIGERIA LIMITED manufactures its product through three processes. The following data relates to Process 2 and Process 3 for the month of October:

100,000 units at N10 each were transferred from Process 1 to Process 2.

Cost Components	Process 2 (N)	Process 3 (N)
Direct Materials	100,000	114,000
Direct Labour	135,000	100,000
Variable Expenses	30,000	53,500
Production Overhead	250,000	200,000

Normal output: 90% for Process 2 and 80% for Process 3
Actual output: 85,000 units for Process 2 and 70,000 units for Process 3
Scrap value of loss: N3 per unit for Process 2 and N2 per unit for Process 3

Required:
a. Prepare Process 2 and Process 3 accounts (16 Marks)
b. Prepare the Normal Loss account (2 Marks)
c. Prepare the Abnormal Gain account (2 Marks)

Answer

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Tags: Abnormal Gain, Manufacturing Costs, Normal Loss, Process Costing, scrap value
Level: Level 1

Topic: Process Costing
Series: MAY 2015

MI – May 2024 – L1 – SA – Q10 – Costing Methods

Identifies a statement that is NOT a common feature of process costing systems.

Question

There are common features in most process costing systems. Which of the following is NOT one of the common features? A. Clearly defined process cost centres and the accumulation of all costs
B. Maintenance of accurate records of units and part units produced and the cost incurred by each process
C. Averaging of the prime costs of each process over the total production of that process, excluding partly completed units
D. Charging of the cost of the input of one process as the raw materials input of the following process
E. Clearly defined procedures for separating costs where the process produces two or more products

Answer

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Tags: Common Features, Cost Accumulation, Prime Costs, Process Costing
Level: Level 1

Topic: Costing Methods
Series: MAY 2024

MI – May 2024 – L1 – SA – Q9 – Costing Techniques

Calculates profit on one product in a joint-cost situation with normal process loss.

Question

RSTU manufactures two products called S and T with a joint cost of N3,550,000. Normal process loss is 5% of expected output with scrap value of N50,000 and joint costs are apportioned based on sales value. Other data available are as follows:
Product S: 11,520 units, selling price N250
Product T: 9,750 units, selling price N320

The profit on product T is:
A. N1,515,628
B. N1,492,708
C. N1,416,000
D. N1,300,000
E. N1,274,000

Answer

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Tags: apportionment, Joint Costs, Process Costing, Profit Calculation
Level: Level 1

Topic: Costing Techniques
Series: MAY 2024

MA – Nov 2016 – L2 – Q3a – Decision making techniques

Advise on whether to further process joint products or sell at split-off based on cost and revenue analysis.

Question

Pinto Company Limited processes materials into finished products. After process one, two main products PEF and CEF are turned out. The production processes allow for 10% normal loss at process one and 5% for each product if it is to be processed further. The scrap at process one can be sold for GH¢6.60 per unit. The standard prices of the products are as follows: PEF to be sold at split-off point for GH¢17 per unit but can be sold for GH¢28 per unit after further processing. A unit of CEF can also be sold for GH¢16 at split-off point or GH¢25 after further processing. Further processing costs are: PEF; direct materials GH¢4 per unit and conversion GH¢3.50 per unit. The materials and conversion costs per unit for CEF are GH¢5 and GH¢4 respectively.

In the month of August 2016, 6,000 units were processed through process one at the following costs: direct materials GH¢40,000, conversion GH¢32,000. The output at the end of process one was 3,000 units for PEF and 2,000 units for CEF.

Required:

Advise management on which of the products should be processed further and which should be sold at split-off point if volume is used to share common cost. (12 marks)

Answer

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Tags: Further Processing, Incremental Analysis, Joint Products, Process Costing, Split-Off Point
Level: Level 2

Topic: Decision making techniques
Series: NOV 2016

IMAC – July 2023 – L1 – Q1 – Cost-Volume-Profit (CVP) Analysis | Process Costing

Prepare the Process Account for Omicron vaccine production and calculate the break-even point and required units to achieve target profit before and after tax

Question

a) Adom Ltd manufactures Omicron vaccine for the treatment of COVID-19 in Africa. The manufacturing process uses two raw materials (M & W) which are mixed in the proportions (2:3). Materials are priced: M = GH¢10 per kg and W = GH¢3.2 per kg. Normal weight loss of 5% of material input is expected during the process, and material losses recorded in the manufacturing process have no saleable value. At the end of production, 18,260 kg of Omicron vaccine were manufactured from 19,320 kg of raw materials. Conversion costs in the period were GH¢57,316. There was no work in process at the beginning or end of the period.

Required:
Prepare the Process Account of the Omicron vaccine for the period. (10 marks)

b) Manna Industries sold 150,000 units of its product at GH¢20 per unit. Variable costs are GH¢15 per unit (manufacturing cost of GH¢12 and selling expenses of GH¢3). Fixed costs are incurred uniformly throughout the year and amount to GH¢972,000, that is, manufacturing costs of GH¢600,000 and selling expenses of GH¢372,000.

Required:
i) Calculate the break-even point in units and Ghana cedis. (4 marks)
ii) Calculate the number of units that must be sold to earn an income of GH¢75,000 before income tax. (2 marks)
iii) Calculate the number of units that must be sold to earn an after-tax profit of GH¢100,000 if the income tax rate is 40%. (4 marks)

Answer

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Tags: After-tax Profit, Break-even Analysis, Process Costing, Target Profit
Level: Level 1

Topic: Cost-Volume-Profit (CVP) Analysis, Process Costing
Series: JULY 2023

Question Tag: Process Costing

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MI – Nov 2020 – L1 – SA – Q7 – Costing Methods

Calculate the quantity of goods production given wastage and abnormal loss.

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MI – Nov 2020 – L1 – SA – Q5 – Costing Methods

Identify an incorrect statement about marginal costing in process costing.

You're reporting an error for "MI – Nov 2020 – L1 – SA – Q5 – Costing Methods"

MI – Nov 2015 – L1 – SA – Q9 – Costing Methods

Calculates the quantity of good production after accounting for normal and abnormal losses.

You're reporting an error for "MI – Nov 2015 – L1 – SA – Q9 – Costing Methods"

MI – May 2018 – L1 – SB – Q1 – Costing Methods

Preparation of process, abnormal loss, and abnormal gain accounts for Queensly Nigeria Limited.

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MI – May 2018 – L1 – SA – Q8 – Costing Methods

Equivalent units and costing method classification.

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MI – May 2022 – L1 – SA – Q2 – Costing Methods

Impact of ignoring equivalent units for normal loss in process costing.

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MI – May 2021 – L1 – SA – Q7 – Costing Methods

Identify the correct definition of abnormal gain in costing.

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MI – May 2021 – L1 – SA – Q6 – Costing Methods

Identify the concept not associated with process costing.

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MI – May 2023 – L1 – SB – Q1 – Costing Methods

Preparation of Process 1 and Process 2 accounts, including the cost of goods produced and applicable abnormal loss or gain.

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MI – May 2017 – L1 – SA – Q7 – Costing Techniques

Identify the costing method used for mass production.

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MI – May 2017 – L1 – SA – Q3 – Costing Methods

Identify the element not used in process costing.

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MI – May 2015 – L1 – SB – Q2 – Costing Methods

Prepare process accounts, normal loss account, and abnormal gain account for Maputo Nigeria Limited for Process 2 and Process 3.

You're reporting an error for "MI – May 2015 – L1 – SB – Q2 – Costing Methods"

MI – May 2024 – L1 – SA – Q10 – Costing Methods

Identifies a statement that is NOT a common feature of process costing systems.

You're reporting an error for "MI – May 2024 – L1 – SA – Q10 – Costing Methods"

MI – May 2024 – L1 – SA – Q9 – Costing Techniques

Calculates profit on one product in a joint-cost situation with normal process loss.

You're reporting an error for "MI – May 2024 – L1 – SA – Q9 – Costing Techniques"

MA – Nov 2016 – L2 – Q3a – Decision making techniques

Advise on whether to further process joint products or sell at split-off based on cost and revenue analysis.

You're reporting an error for "MA – Nov 2016 – L2 – Q3a – Decision making techniques"

IMAC – July 2023 – L1 – Q1 – Cost-Volume-Profit (CVP) Analysis | Process Costing

Prepare the Process Account for Omicron vaccine production and calculate the break-even point and required units to achieve target profit before and after tax

You're reporting an error for "IMAC – July 2023 – L1 – Q1 – Cost-Volume-Profit (CVP) Analysis | Process Costing"

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