N12401 MAD II Seminar 2 Part 1 Process Costing

1

Indicative Answers

Please check your work against these, we will discuss these during Seminar 2.

1 A 6 D 11 C 16 B

2 C 7 D 12 B 17 B

3 C 8 C 13 B 18 A

4 B 9 D 14 C 19 C

5 C 10 B 15 A

20.

(a) Direct material cost per unit of output is $10 per unit

(b) Conversion cost per unit of output is:

P1: $14 per unit

P2: $26 per unit

21.

(a) Material 220,000; Conversion 214,000.

(b) Material $2.94; Conversion $1.30.

(c)

Cost to be accounted for:

Work-in-process, 1 Nov $98,000

Cost added in Nov $827,000

Total cost $925,000

Cost accounted for as follows:

Transferred to the next department $805,600

Work-in-process, 30 Nov $119,400

Total cost $925,000

22 Answer should identify the benefits and drawbacks of the method, and point out its common

criticisms in that the figures computed for product costing purposes are averaging between the

previous period and the current period. Specifically, current performance should be measured in

relation to costs of the current period only, and evaluation of performance that is influenced to

some extent by what happened in a prior period will not be meaningful. Since the weighted-

average method mixes these costs in with costs of the prior period, the weighted average costs

should not be used to evaluate cost control or measure performance for the current period.