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based on process costing of production

. Eastland’s Company limited makes a chemical that passes through three production processes 1,2 and 3. In the month of April, 6000 litres of the basic raw material priced at Ksh. 240,000 were introduced into process 1. Subsequently the following costs were incurred;

ELEMENT OF COST
TOTAL COST
PROCESS
PROCESS
PROCESS
Currency
KSH
KSH
KSH
KSH
Processes
 
1
2
3
Direct material
87500
30,000
40000
17500
Direct labour
110,000
40000
50000
20000
Direct expenses
16900
6000
1600
9300
 

Normal loss per process was estimated as:

Process 1      10%

Process 2       5%

Process 3       8%

Output of each process was;

Process 1               5300

Process 2               5000

Process 3               4700

The loss in each process represented scrap which could be sold for the following values:

Process 1               Ksh. 20 per unit

Process 2               Ksh.44 per unit

Process 3               Ksh.55 per unit

There were no stocks of material or work in progress at the beginning or at the end of the month. The output of each process passes directly to the next process and finally to finished stock. Production overhead is absorbed by each process on a basis of 50% of the cost of direct lab our.

Required: Prepare separate process accounts for each of the three processes.       (6 Marks)

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