CFM22B2

Unit 4: Process Costing

Additional Questions
1. COLOUR COUNTRY: ............................................................................................ 2
2. TROY: ................................................................................................................ 3
3. SUNNYSKIES: ..................................................................................................... 4
4. RUBYRED: ......................................................................................................... 5
5. MR WHEELS: ..................................................................................................... 6
6. LAYS LTD: ......................................................................................................... 7
7. CRAYON LTD:..................................................................................................... 9
8. TRU-CAPE: ...................................................................................................... 11

Important calculations
While doing these questions, you must pay attention to the calculation of the following:

• Equivalent units
• Cost per cost element
• Cost statement
• Cost allocation statement
CFM22B2 Unit 4: Process Costing additional questions

1. Colour Country
Colour Country CC manufactures a single product in a single process. Material is added in the
beginning of the process. Conversion cost is incurred evenly through-out the process. Losses
occur in the beginning of the process and normal loss is estimated at 5% of the units that
reach the spoilage point. Colour Country CC uses the First-in-first-out inventory valuation
method.

The following production information is available for May:

O/B: WIP Units started C/B: WIP
Units 1 000 9 000 3 000
% Completed 20% 60%
Units completed and transferred were 6 500.

The following cost information is available:

Opening work-in-process (previous month’s cost):
Material R60 000
Conversion R90 000
The current months cost is as follows:
Material R547 200
Conversion R834 300

REQUIRED:
a) Prepare the Quantity statement.
b) Prepare the Cost statement
c) Prepare the Cost allocation statement.

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CFM22B2 Unit 4: Process Costing additional questions

2. Troy
Troy CC manufactures a single product in a single process. Material is added in the beginning
of the process. Conversion cost is incurred evenly through-out the process. Losses occur
when the process is 25% completed and normal loss is estimated at 4% of the units that reach
the spoilage point. In the beginning of June there were 5 000 units in work-in-progress which
were 30% completed. During the month 40 000 units were started and on 30 June there were
1 500 units in work-in-progress which were 55% completed. Units completed and transferred
during June were 41 000.

The following cost information is available:

Opening work-in-process:

R40 per unit

Material

R220 500
Conversion

The current months cost is as follows:

Material
R10 050 000

R 4 063 500
Conversion

REQUIRED:
If the company uses First-in-first-out (FIFO) valuation method (FIFO):
a) Prepare the Quantity statement.
b) Prepare the Cost statement
c) Prepare the Cost allocation statement.

If the company uses Weighted average valuation method (WAM):

d) Prepare the Quantity statement.
e) Prepare the Cost statement
f) Prepare the Cost allocation statement.

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CFM22B2 Unit 4: Process Costing additional questions

3. SunnySkies

SunnySkies CC manufactures a single product in a single process. Material 505 is added in

the beginning of the process and material 605 when the process is 40% completed.
Conversion cost is incurred evenly through-out the process. Losses occur when the process
is 30% completed and normal loss is estimated at 3% of the units that reach the spoilage point.
SunnySkies CC uses the First-in-first-out inventory valuation method.

The following production information is available for August:

Unit
Units put into
O/B: WIP started & C/B: WIP
production
completed
Units 4 500 18 000 13 000 3 800
% Completed 75% 45%

The costs relating to units in work-in-process in the beginning of the month are:
R1 260 000 for Material 505, R495 000 for Material 605 and R270 000 for conversion cost.

Whereas the current month’s costs are: R5 238 000 for Material 505, R2 637 600 for
Material 605 and conversion cost amounted to R1 859 828.

REQUIRED:
a) Prepare the Quantity statement.
b) Prepare the Cost statement
c) Prepare the Cost allocation statement.

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CFM22B2 Unit 4: Process Costing additional questions

4. RubyRed

RubyRed CC manufactures a single product in a single process. Material Alpha is added in

the beginning of the process and material Beta when the process is 45% completed.
Conversion cost is incurred evenly through-out the process. Losses occur when the process
is 30% completed and normal loss is estimated at 5% of units that reach the spoilage point.
RubyRed CC uses the First-in-first-out inventory valuation method.

The following work-in-progress (WIP) production information is available for July:

O/B: WIP C/B: WIP
Units 2 000 2 500
% Completed 40% 60%

During the month 14 000 units were put into production and 10 000 units were started and
completed.

Cost incurred for the current month are: R399 000 for Material Alpha, R174 000 for Material
Beta and R129 400 for Conversion cost.

Costs relating to units in work-in-process in the beginning of the month were:

Material Alpha R52 000
Conversion R 7 200

REQUIRED:
a) Prepare the Quantity statement
b) Prepare the Cost statement
c) Prepare the Cost allocation statement
d) Calculate the gross profit, if all the finished products are sold at a selling
price of R75 per unit.

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CFM22B2 Unit 4: Process Costing additional questions

5. Mr Wheels
Mr Wheels manufacture wheelbarrows.
A wheelbarrow is a carrier, usually having only one
wheel, consisting of a tray (made of plastic or steel)
bolted to two handles and two legs. A steel brace
attaches the tray to the steel frame and a steel wheel,
with a rubber tyre around it. Known mostly as a device
for carrying small loads for the household gardener.

The typical plastic used to make wheelbarrow trays is polyethylene. The process starts
when sheets of polyethylene are shaped into trays using a technique known as vacuum-
forming or thermo-forming. This process involves heating the sheet until it is soft. The soft
plastic is then placed on top of an open box. The box contains a mould in the shape of the
wheelbarrow tray. Air is removed from the box, and the resulting vacuum causes the air
pressure outside the box to force the sheet against the mould. The plastic cools into the
wheelbarrow tray and is removed. The steel frames are pre-manufactured and are added
when the process is 75% complete. The wheels are added when the process is 85%
complete. Conversion cost is incurred evenly throughout the process.

At the beginning of July 2020 Mr Wheels had 2 500 wheelbarrows in process which were
35% complete. The cost of the plastic trays that were added in June amounts to R120 per
wheelbarrow. The conversion costs for June amounts to R74 375. During July 25 000
wheelbarrows were completed, these were transferred to finished goods. The current cost
amounts to R3 059 000 for Plastic and R2 338 770 for conversion. The frame costs R55
and the wheels R100 per wheelbarrow. At the end of the month 3 750 wheelbarrows were
80% completed. Wheelbarrows put into production amounted to 28 000.

Losses occur when the process is 20% completed. Normal loss is estimated at 5% of units
that reach the spoilage point.

REQUIRED:

Prepare the Process cost report, clearly showing the Quantity statement, Cost statement
and Cost allocation statement if the First-in-first-out valuation method is used.

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CFM22B2 Unit 4: Process Costing additional questions

6. Lays Ltd

Lays Ltd is manufacturing chips. The chips are manufactured in two consecutive processes,
the frying and packaging processes. Potatoes are added at the beginning of the frying process.
The potatoes are peeled and cut into chips. This results in a loss of 5% when the process is
40% complete. The chips are fried until golden brown. Flavouring is added when the process
is 60% completed. The mixture is allowed to cool down. When the chips are cooled, it is
transferred to the packaging process. Conversion costs are incurred evenly throughout both
processes. In the packaging process, ½ kg chip bags are added when the process is 50%
complete. The chips are then distributed to customers.

The following unit and cost information is available for August:

Frying Process Packaging Process
Units
Opening work-in-process 5 000 kg 8 000 packets
Stage of completion 65% 25%
Units completed and transferred 30 000 kg 57 200 packets
Units started 31 000 kg ?
Closing work-in-process 3 000 kg 10 800 packets
Stage of completion 45% 60%

Frying Process Packaging Process

Costs
Opening work-in-process (previous
month’s cost)
Frying process R8 per kg
Potatoes R15 000
Flavouring R4 500
Conversion R17 500 R2 000
Current Cost
Potatoes R147 250
Flavouring R25 000
Chip Bags R1.50 per bag
Frying process ?
Conversion R43 020 R40 092

REQUIRED:
a) Prepare the process cost report for the Frying department if the company uses the
First-in-first-out method of inventory valuation.

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CFM22B2 Unit 4: Process Costing additional questions

b) Prepare the process cost report for the Packaging department if the company uses
the First-in-first-out method of inventory valuation.
c) Prepare the process cost report for the Frying department if the company uses the
Weighted average method of inventory valuation.
d) Prepare the process cost report for the Packaging department if the company uses
the Weighted average method of inventory valuation.
.
(Reminder: The Frying process is measured in kg’s, and Packaging in ½ kg packets.)

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CFM22B2 Unit 4: Process Costing additional questions

7. Crayon Ltd

Crayons are made from paraffin, a waxy substance

derived from wood, coal, or petroleum. The first package
of eight coloured crayons, suitable for use in schools by
children, was sold in 1903. Crayons are made of paraffin
mixed with various chemical pigments.

Crayon manufacturing is a simple process, where crayons move through the mixing and
moulding department and then transferred to the packaging department. This process is still
relatively labour intensive.
The process starts when paraffin is
pumped into heated tubs. The colour
pigments are added when the process is
20% completed. When the combination of
paraffin and colour are fully blended, the
batch is automatically pumped out of the
tubs into the moulds.
The moulds are cooled as water circulates
around them. The moulds used for the
crayons might hold as many as 2 400
crayons.
Losses occur when the process is 50%
completed. Normal loss is expected to be
1% of units that reach the spoilage point.

Crayons then travel down a conveyor belt

to the wrapping machine. This take
place when the process is 90%
complete. The wrapped crayons are
then moved to the packaging department
for boxing.
At the beginning of the month there were 40 000 crayons that were still to be moulded. (70%
completed). During the month production of 505 000 crayons were started. At the end of the

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CFM22B2 Unit 4: Process Costing additional questions

month, 18 000 crayons were still in process at 60% completion. During

the month the mixing and moulding department completed 520 000
crayons.

In the packaging department the different colours of crayons are

combined for in the standardised packet of eight. Crayons are automatically filled into boxes
(at 80%) and sent to finished goods, ready to be shipped to customers. At the beginning of
the month there were enough crayons to fill 7 500 boxes but still needed to be boxed (75%).
At the end of the month 5 000 boxes were 90% completed. No losses are expected in the
packaging department.

The following cost information is available:

Opening: WIP Current Cost
Mixing and Moulding department
Paraffin R8 000 R999 900
Colouring R4 000 R499 950
Wrappers R0 R260 000
Conversion R12 000 R1 511 325
Packaging department
Mixing and Moulding (Previous Process) R84 000 ?
Boxes R0 R145 000
Conversion R5 625 R165 937,50

REQUIRED:
a)
Prepare the Process cost report for the Mixing and Moulding department
(measured in crayons) if the company uses the FIFO valuation method.
b)
Prepare the Process cost report for the Packaging department (measured in
boxes of 8 crayons) if the company uses the FIFO valuation method.

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CFM22B2 Unit 4: Process Costing additional questions

8. Tru-Cape

Tru-Cape Limited manufactures apple and pear juice in two consecutive processes using the
FIFO method of inventory valuation. The process starts in the processing department where
the fruit pulp is added in the beginning of the process. The pulp is then pressed, and all the
solids are drained off. The fruit juice goes through a process of moisture reduction before the
sweeteners are added at 75% of the process. During the moisture reduction process 4% off
the mixture is lost. This expected loss is detected when the process is 60% complete. The
mixture is cooled and put into holding tanks in preparation for the bottling process.
In the bottling process the mixture is heated to UHT temperatures to sterilize the concentration
before being bottled in 500ml bottles at 25% of the process. The bottles are then fed through
the cooling process before being capped when the process is 70% complete before being sent
off to the packaging department. No losses are expected in the bottling department.
Conversion cost is incurred uniformly throughout the processes.

The following relates to the activities for August:

Units Mixing Process Bottling process

WIP (Opening) 15 000 litres (70%) 12 000 bottles (45%)
Total loss 3 500 litres 0
WIP (Closing) 6 500 litres (65%) 7 000 bottles (40%)
Units started 60 000 litres ? bottles
Completed and transferred 65 000 litres ? bottles

Cost Mixing Process Bottling process

Beginning WIP:
Fruit pulp R154 800
Sweeteners R0
Conversion R45 000

Cost transferred from Mixing Process R7.25 per bottle

Bottles R7 200
Caps -
Conversion costs R7 020

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CFM22B2 Unit 4: Process Costing additional questions

Costs added during August:

Fruit pulp R979 200
Sweeteners R150 000
Conversion R293 075

Costs transferred from mixing process ?

Bottles R84 500
Caps R27 000
Conversion costs R178 740

REQUIRED
a)
Prepare the Process cost report for the Mixing department (measured in litres)
if the company uses the FIFO valuation method.
b)
Prepare the Process cost report for the Bottling department (measured in
500ml bottles) if the company uses the FIFO valuation method.
c)
Prepare the Process cost report for the Mixing department (measured in litres)
if the company uses the WAM valuation method.
d)
Prepare the Process cost report for the Bottling department (measured in
500ml bottles) if the company uses the WAM valuation method.

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