Question

Industrial Solvents Limited mixes together three chemicals - A, B and C - in the ratio 3:2:1 to produce

Allklean, a specialised anti-static fluid. The chemicals cost £8, £6 and £3.90 per litre respectively.

In a period, 12 000 litres in total were input to the mixing process. The normal process loss is 5% of input

and in the period there was an abnormal loss of 100 litres whilst the completed production was 9500

litres.

There was no opening work-in-progress (WIP) and the closing WIP was 100% complete for materials and

40% complete for labour and overheads. Labour and overheads were £41 280 in total for the period.

Materials lost in production are scrapped.

(a). What's the volume of closing WIP

(b). What's the mixing process account for the period, showing clearly volumes and values.

(c). What changes would be necessary in your account if an abnormal gain were achieved

in a period

Answer 1

material costs incurred during period=12000*(8*3/6 + 6*2/6 + 3.9*1/6)=79800
a) Mixing Process production report:
Input	Particulars	Physical units	material	Conv. Costs	Total
0	OP WIP	0
12000	Started & Completed	9500	9500	9500
	Normal Loss (5%)	600	0	0
	Abnormal Loss	100	100	100
	CL WIP	1800	1800	720
12000	Equivalent units	12000	11400	10320
	Cost Incurred		79800	41280
	Cost per Eq. unit		7	4
	Cost of Cl WIP		12600	2880	15480
	Cost of Completed units		66500	38000	104500
	Cost of Abnormal Loss		700	400	1100

b) Mixing Process account:
DEBIT			CREDIT
Particulars	Units	Amount $	Particulars	Units	Amount $
Op WIP	0	0	Normal Loss	600	0
Units Introduced	12000	79800	Abnormal Loss	100	1100
Conversion cost		41280	Finished units	9500	104500
			CL WIP	1800	15480
	12000	121080		12000	121080
c) If the abnormal loss is achievable in a period, then the same is termed as "Abnormal
Achievable" and included in the Closing WIP with the achievable amount. No abnormal loss recorded.