Question

Question 2

Nola Apparels Limited produces fashionable clothes for all ages through two processes; cutting and assembly materials undergo these processes in cutting and assembly departments. At the beginning of August 2020, the cutting process has opening WIP of 200 units at $8 102 and its breakdown was:

Degree of completion $

Materials 100% 4 950

Labour 30% 968

Overheads 20% 2 184

Total 8 102

In August 2020, 1 000 units of materials were added to the cutting process. Due to limitations of the cutting machine, 10% of materials added to the cutting process were expected to become loss with a scrap value of $10 per unit. It is the company’s cost accounting policy to deduct the scrap value of normal losses from the cost of materials in the current process. By end of August, 940 units of finished cutting process were transferred out to the next process: assembly. 100 units remained in closing WIP and their degrees of completion of individual inputs were:

Materials 100%

Labour 60%

Overheads 40%

Costs incurred in August were:

Materials $20 700

Labour $5 074

Overheads $10 920

REQUIRED:
Prepare the process report for August 2020 using the weighted average method showing the following:
2.1	Quantity statement (inclusive of equivalent units)
2.2	Production cost statement per unit
2.3	Cost allocation statement
2.4	Journal entries to record: (i) Raw materials requisitioned by cutting department (ii) Items transferred from cutting department.
2.5	Cutting Process account

Answer 1

2.1	Quantity Statement:
	Opening Balance	200 Units
	Material purchase during month	1000 Units
	Work in process at end	100 Units
	Finished Stock	940 Units
	Wastage or loss (200+1000+100-940)	360

2.2	Production Cost per unit		Amount in $
	Cost of 200 Units
	Material	100% of 4950	4950
	Labour	30% of 968	290.4
	Overheads	20% of 2184	436.8
	Total Cost		5677.2
	Cost of 1000 Units during Aug.
	Material	100% of 20700	20700
	Labour	60% of 5074	3044.4
	Overheads	40% of 10920	4368
			28112.4
	Total Cost of Finished Units	5677.2+28112.4	33789.6
	Cost per unit	(33789.6/940)	35.95
	Approx Cost per unit will be	$36

Answer for 2.3:

2.3 10 Cast Allocation statement Costaf 20 unit in beginning Material overhead Labour 602-968 20. 2184 4950 290.40 136.80 Cost of units completed in August Material Labour overhead looy of $20,700 60.15074 404 10 920 4368 looy 4950 12 Total cost 1950 + 290.40+436.80 a 5677.20 207 + 3044.4 + 4368 -28112 $ 7337892 3

2.4 Journal Entries
a)	For Raw Material Requisition by cutting Department	Debit (In $)	Credit (In $)
	Material account Debit	2070
	To cutting Department		2070
	(10% of 20700)
b)	Transfer from cutting department
	Cutting Department account debit	2070
	T o Profit & Loss A/c (Loss)		2070

2.5 Cutting Process A/c
	Debit (in $)		Credit (In $)
To Profit & Loss Account	2070	By Work in Process	8102
To Finished goods	6032
	8102		8102