Reference no: EM133004285

Question - Edwards plc manufactures silver cutlery which requires two key processes, Melting and Moulding, the output of Melting passing forward to Moulding.

At the start of March 2021, 300 units were 20% complete in Melting and 400 units were 70% complete in Moulding. The costs associated with the opening work-in-progress, WIP, were:

Melting (£) Moulding (£)

Materials: 1,000 420

Conversion Costs: 150 7,000

1,150 7,420

During March 5,150 units were started in Melting. In Melting 150 units were lost when the process was 50% complete, and in Moulding 200 units were lost when the process was 40% complete. Treat all losses as normal losses. Materials in Melting are added uniformly during the first 50% of the processes and materials in Moulding are added at the start of the Moulding process. For Melting conversion costs are added uniformly throughout the process and for Moulding conversion costs are added uniformly during the last 50% of the Moulding process.

During the month, the following costs were incurred:

Melting (£) Moulding (£)

Materials: 42,240 5,200

Conversion Costs: 10,480 18,960

By the end of March 2021 the WIP quantities were 100 units in Melting, 25% complete, and 500 units in Moulding, 40% complete.

REQUIRED -

a) Calculate the cost of finished product and closing WIP in each department using the FIFO method of process costing. Assume normal losses are all allocated to the finished product.

b) Explain the difference between normal and abnormal losses and the accounting treatment of normal and abnormal losses. Had the normal losses in "a" been treated as abnormal losses calculate the value of finished product in Melting.