Discussion Question On Methods Of Apportioning Joint Costs And The Preparation Of Pr 2272170

While the ascertainment of product costs could be said to be one of the objec-tives of cost accounting, where joint products are produced and joint costs incurred, the total cost computed for the product may depend upon the method selected for the apportionment of joint costs, thus making it difficult for management to make decisions about the future of products.’ You are required to discuss the above statement and to state two different methods of apportioning joint costs to joint products. (8 marks) A company using process costing manufactures a single product which pacs,-s through two processes, the output of process 1 becoming the input to process 2. Normal losses and abnormal losses are defective units having a scrap value and cash is received at the end of the period for all such units. The following information relates to the four-week period of accounting period number 7. Raw material issued to process 1 was 3000 units at a cost of £5 per unit. There was no opening or dosing work-in-progress but opening and closing stocks of finished goods were £20 000 and (23 000 respectively.
(b)
Process 1 Process 2 Normal loss as a percentage of input 10% 5% Output in units 2800 2600 Scrap value per unit £2 £5 Additional components £1000 £780 Direct wages incurred £4000 £6000 Direct expenses incurred £10 000 £14 000 Production overhead as a percentage of direct wages 75% 125%
You are required to present the accounts for Process 1 Process 2 Finished goods Normal loss Abnormal loss Abnormal gain Profit and loss (so far as it relates to any of
the accounts listed above). (17 marks) (Total 25 marks) CIMA Stage 2 Cost Accounting
Question IM 5.3 Intermediate: Discussion question on methods of apportioning joint costs and the preparation of process accounts with all output fully completed

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Prof. Angela

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