PART 2

(25 marks)

Better Value produces brass handles for the furniture industry in a four-stage process

-Mixing, Forming,

Polishing and Packaging. Costs incurred in the Polishing Department during January are

summarized as follows:

January 1 Bal.

Transfer from Forming

Direct Materials Added

Direct Labour

Manufacturing Overhead

WIP - Polishing Process A/C

$0

1,310,000

391,600

638,000

307,400

20,000

Normal losses are estimated to be 2½% of input during the period. Inspection takes place

during the processing operation, at which point imperfect handles are separated from good

handles and sold as scrap to local furniture manufacturers at $85 each.

At inspection, 2,000 handles were rejected as scrap. These units had reached the following

degree of completion:

Transfer from

Forming

Direct material added

Conversion costs

Work-in-progress at the end of January was 4,000 handles and had reached the following

degree of completion:

Transfer from

Forming

Direct material added

Conversion costs

(b) Compute the:

100%

40%

20%

Direct materials added and conversion costs are incurred uniformly throughout the

process.

Required:

☐ cost of the unexpected losses

100%

80%

50%

(a) Compute the equivalent units and cost per equivalent units for direct materials

(From Forming &

Direct materials added) and conversion costs.

(10 marks)

total cost of the handles completed and transferred out of the Packaging Department

*cost of ending work in process inventory in the Polishing

Department

(3 marks)

(c) Complete the Work in Process Inventory - Polishing Process T-account, clearly

showing the ending

balance.

(5 marks)

(d) Prepare the journal entries for the:

assignment of direct materials, direct labour incurred, and the manufacturing

overhead applied to the Polishing Process

*cost of the units completed and transferred out to the Packaging

Process

(5 marks)

(e) After completing the physical count, it was determined that 30% of the

unexpected losses were because of pilferage. In view of this finding,

determine Better Value's true loss associated with the

Polishing Process.

(2 marks)

"Don't wait for your boat of success to come in; row out to

meet it" Uriel Salmon

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