CIMA CO1 Official Learning System - Fundamentals of Management Accounting
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Solutions to
Revision Questions
Solution 1
For some of these multiple-choice questions you will need to use some fairly extensive
workings. In the assessment, you will not be awarded marks for the workings, but do not
be tempted to rush them: they are an important part of answering the question, and they
will be of no use to you if you cannot read them!
1.1 Answer: (B)
Closing WIP in process B (13,500 11,750) units 1,750 units
Unit value £ 4.50 £ 1.25 £ 2.50 £ 8.25
Closing WIP value £ 8.25 1,750 £ 14,437.50
1.2 Answer: (B)
Abnormal losses are valued at the same rate as good production, so that their occur-
rence does not affect the cost of good production.
1.3 Answer: (A)
kg
Input 2,500
Normal loss (10%) (250)
Abnormal loss (75)
Good production 2,175
1.4 Answer: (C)
The abnormal gain account shows the net benefi t of the abnormal gain. The scrap
value must be debited to the abnormal gain account to allow for the ‘ forgone ’ scrap
value of the normal loss units which did not arise.
1.5 Answer: (A)
Normal loss 5,000 kg 20% 1,000 kg @ 30 p £ 300
9
PROCESS COSTING
SOLUTIONS TO REVISION QUESTIONS C1
272
1.6 Answer: (C)
Abnormal loss
kg
Input 5,000
Normal loss (1,000)
Output (3,800)
Abnormal loss 200
Production costs £
Materials 2,500
Labour 800
Production overheads 1,600
4,900
Cost per kg
££
£perkg
Output abno
4 900 300
4 000
115
3 800
,
,*
.
*, rrmal loss kg
Abnormal loss £ kg £
200 4 000
1 15 200 230
,
..
1.7 Answ
er: (B)
V
alue of output £ 1.15 3,800 kg £ 4,370.
Equivalent unit table for 1.8–1.10
Materials Labour/overheads
Units % EU % EU
Output 8,000 100 8,000 100 8,000
Normal loss 1,000 – –
Abnormal loss 100 100 100 100 100
Closing work in progress 900 100 900 75 675
Total equivalent units 10,000 9,000 8,775
Costs £ 40,500 £ 8,424
Equivalent unit cost £ 4.50 £ 0.96
1.8 Answer: (D)
Value of abnormal loss 100 ( £ 4.50 £ 0.96) £ 546.
1.9 Answer: (C)
Value of output 8,000 ( £ 4.50 £ 0.96) £ 43,680.
1.10 Answer: (B)
Closing work in progress: £
900 £4.50 4,050
675 £0.96 648
4,698
PROCESS COSTING
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FUNDAMENTALS OF MANAGEMENT ACCOUNTING
1.11 Answer: (B)
Workings for 1.11 are shown as part of solution 1.12.
1.12 Answer: (A)
Equivalent litres
Input Conversion
Input Litres Output Litres material costs
Opening WIP 1,000 Finished output 24,000 24,000 24,000
Input 30,000 Normal loss 3,000 – –
Abnormal loss 500 500 (60%) 300
Closing WIP 3,500 3,500 (80%) 2,800
31,000 31,000 28,000 27,100
1.13 Answer: (C)
Workings are shown as part of solution 1.14.
1.14 Answer: (D)
Equivalent units table
Materials Labour Production o/h
Description Units % EU % EU % EU
Output 800 100 800 100 800 100 800
Closing WIP 500 100 500 90 450 40 200
EU 1,300 1,250 1,000
£ £ £
Costs – Period 198,000 139,500 79,200
Opening WIP 49,000 23,000 3,800
Total cost 247,000 162,500 83,000
Cost per equivalent unit 190 130 83
Value of completed output 800 ( £ 190 £ 130 £ 83) £ 322,400.
Solution 2
2.1 When the actual loss in a process is less than the expected loss for the period, there
is an abnormal gain.
2.2
kg
Transferred to next process 4,100
Normal loss (20% 5,000) 1,000
Closing work in process 800
Abnormal gain (900)
5,000
PROCESS COSTING
SOLUTIONS TO REVISION QUESTIONS C1
274
2.3 A £ 80; B £ 10; C £ 70.
Scrap account
£ £
Process 1 – normal loss Abnormal gain 10
(400 kg £ 0.20) 80 (50 £ 0.20)
Balance c/d 70
8 0 80
2.4
Equivalent units in progress Valuation £
Materials 200 ( £ 4) 800
Labour 100 ( £ 3) 300
Overhead 40 ( £ 2) 80
1,180
2.5 A £ 270; B £ 1,100.
Process account [extract]
Units £
Finished goods 4,000 88,000
Normal loss 90 ( £ 3) 270
Abnormal loss 50 ( £ 22*) 1,100
*Abnormal loss units are valued at the same rate as good output (£88,000/
4,000 £22).
2.6 Number of equivalent units of conversion cost 1,120.
Workings are shown as part of solution 2.7.
2.7 Value of work in process at the end of the period £1,128.
Equivalent units table
Since no losses occur in the process, output can be calculated as follows.
Output 300 units opening WIP 900 units input – 200 units closing WIP
1,000 units
Materials Conversion cost
Description Units % EU % EU
Output 1,000 100 1,000 100 1,000
Closing WIP 200 100 200 60 120
1,200 1,120
£ £
Costs incurred in period 3,960 1,890
Opening WIP 1,296 462
Total cost 5,256 2,352
Cost per equivalent unit 4.38 2.10
Value of closing WIP (200 £4.38) (120 £2.10) £1,128.
PROCESS COSTING
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FUNDAMENTALS OF MANAGEMENT ACCOUNTING
Solution 3
●
You can use the standard layout for the working paper that you should have become
accustomed to when working through this chapter. You can then pick out the relevant
parts that you need for your answers.
●
There are no losses, therefore the question is quite straightforward.
●
The transfer to fi nished goods is calculated as follows: 8,250 units input, less 1,600 units
in progress, equals 6,650 units to fi nished goods.
(a) 7,610
(b) (i) £ 691,600
(ii) £ 136,960
Workings:
Equivalent units produced
Previous Materials Labour
Input Units Output Units process added and o/h
Previous 8,250 Finished goods 6,650 6,650 6,650 6,650
process
Closing WIP 1,600 1,600 1,600 960 (60%)
8,250 Equiv. units
produced
8,250 8,250 8,250 7,610
Costs £ £ £ £
Period costs 453,750 24,750 350,060
Cost per
equiv. unit
104 55 3 46
Valuation
Finished goods 691,600
Closing WIP 136,960 88,000 4,800 44,160
(1,600 £55) (1,600 £3) (960 £46)
Solution 4
●
Read the question carefully. The normal loss calculation is based on the completed pro-
duction rather than on the more usual basis of input to the process.
●
The losses are completely processed, therefore you can use the total cost per unit to value
the abnormal loss.
(a) The abnormal loss for the period was 800 kg.
Workings:
kg
Input 36,000
Less: Closing WIP (8,000)
Production 28,000
Normal loss: 2,800
10% 28,000 kg
Actual loss 3,600
Abnormal loss 800
PROCESS COSTING
SOLUTIONS TO REVISION QUESTIONS C1
276
(b) Materials: 33,200 equivalent kg.
Labour and overhead: 29,200 equivalent kg.
(c) (i) £ 6,000
(ii) Credit.
(d) Finished goods: £ 183,000
Normal loss: £ 0
Closing work in progress: £ 50,000
Workings :
Equivalent units
Total Material Labour Overhead
Input kg Output kg kg kg kg
From mixing 36,000 Finished goods 24,400 24,400 24,400 24,400
Abnormal loss 800 800 800 800
25,200 25,200 25,200 25,200
Normal loss 2,800 – – –
Closing WIP:
Material (100%) 8,000 8,000
Labour (50%) 4,000
Overheads (50%) 4,000
36,000 33,200 29,200 29,200
Cost (£) 239,000 166,000 43,800 29,200
Cost per unit (£) 7.50 5.00 1.50 1.00
Evaluation (£)
Finished goods 183,000
Abnormal loss 6,000
Closing WIP 50,000 40,000 6,000 4,000
Solution 5
●
There is opening work in progress to deal with in this question, so you will probably
fi nd it easiest to use the full working schedule, beginning with an input/output recon-
ciliation. Although you will not be awarded any marks for these workings, they will help
you to achieve the required 100 per cent accuracy.
●
Do not be confused by the fact that the opening work in progress consists of complete
units. Simply deal with it using the method that you learned in this chapter, that is
include it as part of the input and include its value in the cost section of your working
schedule.
(a) Materials: 39,200
Labour and overhead: 37,600.
(b) Finished goods: £628,200
Closing work in progress: £40,240.
PROCESS COSTING
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FUNDAMENTALS OF MANAGEMENT ACCOUNTING
Workings :
Equivalent units produced
Input Units Output Units Materials Labour Overhead
Opening WIP 3,400 Finished goods 36,000 36,000 36,000 36,000
Further units 37,000 Normal loss 1,200 – – –
Closing WIP 3,200 3,200 1,600 1,600
40,400 40,400 39,200 37,600 37,600
Cost £ £ £ £
Opening WIP 56,100 25,500 10,200 20,400
Period costs 612,340 276,340 112,000 224,000
668,440 301,840 122,200 244,400
Cost per unit 17.45 7.70 3.25 6.50
Evaluation
Finished goods 628,200
Closing WIP 40,240 24,640 5,200 10,400
Solution 6
●
You will need to prepare a statement of equivalent units and calculate the cost per equiva-
lent unit.
●
There are no losses to be accounted for, so all of the cost incurred is to be divided over
the completed units and the units in progress.
●
Be accurate with your workings. Although they will not be awarded marks, they will
help you to achieve the necessary 100 per cent accuracy.
Equivalent units to absorb cost
Input Units Output Units Materials Labour/OH
Process 2 input 2,000 Finished goods 1,800 1,800 1,800
Closing WIP 200 200 (50%) 100
2,000 2,000 2,000 1,900
Costs £ £ £
Incurred in period 8,000 3,800
Cost per unit 6 4 2
Evaluation
Finished goods
(1,800 £ 6) 10,800
Closing WIP 1,000 800 200
Process 3 account
Units £ Units £
Process 2 input 2,000 8,000 Finished goods 1,800 10,800
Labour and overhead 3,800 Work in progress 200 1,000
2,000 11,800 2,000 11,800
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Presenting Management
Information