Management Accounting 2

Question 2


Jumco Limited, which uses process costing, manufactures a single product which passes through two processes, the output of process 1 becoming the input of process 2.


Normal losses and abnormal loss 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 a four-week period:


18,000 units of raw material were issued to process 1 at a cost of €5.00 per unit.  There was no opening or closing work in progress but opening and closing stocks of finished goods were €30,000 and €35,000 respectively.




Process 1                     Process 2


Normal loss as a percentage of input              4.50%                          6.00%

Output in units                                                17,150                         16,150

Scrap value per unit – €                                      2.00                            6.00

Direct wages incurred – €                                15,000                         25,000

Additional components – €                             10,140                         11,176


Production overhead as a percentage of

Direct wages                                                   80%                             45%



Present the accounts for the following:


(a)                Process 1

(b)               Process 2

(c)                Finished goods

(d)               Normal loss

(e)                Abnormal loss

(f)                Abnormal gain


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