QUESTION 1 (JAN2012) Qasih Alya Bhd is a company which produces air-fresheners.

One of the products, Air Wock needs to undergo two processes, known as Process 1 and Process 2. The followings are the information regarding the two processes: Process 1 Raw materials Direct labour Direct expenses Output Process 2 Additional raw materials Direct labour Direct expenses Finished goods Additional Information: 1. Overhead charged for the department is RM10,000 which is to be apportioned between the two processes based on the direct labour hours. 2. Normal loss for each process is estimated at 5% of input. 3. The scrap value of the loss from Process 1 is RM1.00 per kg, but loss from Process 2 has no value.

7,500 kg @ RM5.00 per kg 1,000 hours @ RM8.00 per hour RM2,500 6,000 kg

RM7,500 1,500 hours @ RM5.00 per hour RM4,000 7,500 kg

Required: a) i. ii. iii. Prepare the following accounts: Process 1 account Process 2 account Normal loss account, Abnormal loss or Abnormal gain account (if any) (16 marks) b) Explain the differences between normal loss and abnormal loss. (4 marks) (Total: 20 marks)

QUESTION 2 Gyro Sdn Bhd manufactures a range of cleaning products including a high quality detergent, Supershine, which passes through 2 processes before completion. For the month of September 2011, data relating to this product is given below: Process 1 Direct material (20,000 units) Direct expenses Direct wages (1600 hours @RM5) Output (unit) Normal output Process 2 Materials added Direct expenses Direct wages (2400 hours @ RM5) Output (unit) Normal output RM19,000 RM1,900 RM12,000 16,600 90% of input RM33,000 RM3,000 RM8,000 18,500 95% of input

Additional Information: i. Total production overhead cost for the period is RM7,000 and is to be absorbed into each process based on direct labour hours. Losses have been identified to be incurred at the end of each process. All losses in Process 1 and Process 2 are sold at RM0.50 and RM1.00 per unit respectively.

ii.

Required: a) Prepare the following accounts: i. ii. iii. Process 1 and Process 2 Accounts Normal Loss Account Abnormal Loss Account and/or Abnormal Gain Account

Note: Show all workings. Use four decimal places for price per unit. (18 marks) b) State two (2) reasons for abnormal loss. (2 mark) (Total: 20 marks)

QUESTION 3 (April 2011) BenC Sdn Bhd manufactures tyre for car manufacturers in Malaysia. The tyres were made in a series of three process centers namely Process A, Process B and Process C. Below is the relevant cost involved for March 2011: i. In Process A, input of material is 40,000 kilograms at RM20 per kilogram, direct labor cost incurred was RM250,000, direct expenses RM160,000 and overhead costs amounted RM240,400. During Process B, material was added into the production amounted to RM350,000, direct labour cost incurred was RM250,000, direct expenses RM50,000 and overhead cost RM84,580. In the final process, Process C there was no additional material, but direct labour cost incurred amounted to RM100,000, direct expenses RM50,000 and overhead cost RM66,600.

ii.

iii.

Based on previous experience, the company estimates normal losses as a percentage of input for each process as follows: Normal Loss 2% 4% 5% Scrap Value nil RM10.00 per unit RM20.00 per unit

Process A Process B Process C

The output for the processes is: Process A Process B Process C 38,500 units 38,000 units 36,100 units

Required: a) Prepare Process A account, Process B account and Process C account. (15 marks) b) Prepare Abnormal Loss account and/or Abnormal Gain account. (2 marks) c) State three (3) reasons for process losses. (3 marks) (Total: 20 marks)