Reminder – Assignment submission

This is to remind you guys regarding the submission of the assignments on the 23rd October 2017. Kindly be reminded that there will no marks at all for the late submission. I’ve warned earlier.

Again, if you wanna print your assignment, you can contact the person below…



ACC2232 – Cost Accounting (Solution to Contract Costing)

Just now, we have done some exercises and here is the answer for the said question…


Contract Account

ParticulaRM Amount ParticulaRM Amount
To Materials 44,250 By Work-in-progress:  
To Plant and Tools 12,200 Work Certified  
To Labour Charges 56,180 ( 1,00,000 x 100/80) 1,25,000  
To General Charges 4,650 Work Uncertified          6,145 1,31,145
To Notional Profit c/d 25,290 By P & L account 1,300
    By materials return to store 2,125
    By Plant and Tools at site 8,000
  1,42,570   1,42,570
To P & L A/c ( 25,290 x 2/3) 16,860 By Notional Profit b/d 25,290
To work in progress(reserve) 8,430    
  25,290   25,290

Balance Sheet as at 31-3-2015

  Liabilities RM. Assets RM.  
  Share Capital 40,000 Bank 45,000  
  P & L A/c                    16,860   Land and Building 25,000  
  Less :                          1,300 15,560 Plant and Tools 8,000  
  Sundry CreditoRM 4,380 Materials at store 2,125  
      Contract A/C  :    
      Work in progress    
      Work Certified      1,25,000    
      Work uncertified       6,145    
      Less : Reserve             8,430    
      Less : Cash Recd.  1,00,000 22,715  
    59,940   59,940

First, Final and Barr….

Alhamdulillah, what a day!

I have just finished doing what I should be doing long time ago….Barring students from the exam. Those students deserved to be treated like that because they showed no interest in studying. So why bother? And they even don’t have the courtesy to meet me and discuss about it. So be it…. At least I have less paper to mark. That’s the blessing. So thanks guys ad gals. And this song is for you….hahahaha


There are also few students who are in their waiting list to be barred, and I can’t wait to do that. I’m really looking forward to do that, can’t wait for this week to be over and next week, these students will be joining the above group. Non-interest group, shall I say like that? Final warning letter will be on its way.

ACC1231 – few

BUS1233 – many

so this Tunggu Sekejap song is for you…. You just wait. Hahahaha

Finally, many students are in the waiting list for their first warning letter. Well,chill,but things can happen anyway…Good luck!



























ACC2232 – Equivalent Units, Joint Products and By-Products

Equivalent units of production

Equivalent units of production is a term applied to the work-in-process inventory at the end of an accounting period. It is the number of completed units of an item that a company could theoretically have produced, given the amount of direct materials, direct labor, and manufacturing overhead costs incurred during that period for the items not yet completed. In short, if 100 units are in process but you have only expended 40% of the processing costs on them, then you are considered to have 40 equivalent units of production.

Equivalent units is a cost accounting concept that is used in process costing for cost calculations. It has no relevance from an operational perspective, nor is it useful for any other type of cost derivation other than process costing.

Equivalent units of production are usually stated separately for direct materials and all other manufacturing expenses, because direct materials are typically added at the beginning of the production process, while all other costs are incurred as the materials gradually work their way through the production process. Thus, the equivalent units for direct materials are generally higher than for other manufacturing expenses.

When you assign a cost to equivalent units of production, you typically assign either the weighted average cost of the beginning inventory plus new purchases to the direct materials, or the cost of the oldest inventory in stock (known as the first in, first out, or FIFO, method). The simpler of the two methods is the weighted average method. The FIFO method is more accurate, but the additional calculations do not represent a good cost-benefit trade off. Only consider using the FIFO method when costs vary substantially from period to period, so that management can see the trends in costs.

Example of Equivalent Units of Production

ABC International has a manufacturing line that produces large amounts of green widgets. At the end of the most recent accounting period, ABC had 1,000 green widgets still under construction. The manufacturing process for a green widget requires that all materials be sent to the shop floor at the start of the process, and then a variety of processing steps are added before the widgets are considered complete.  At the end of the period, ABC had incurred 35% of the labor and manufacturing overhead costs required to complete the 1,000 green widgets. Consequently, there were 1,000 equivalent units for materials and 350 equivalent units for direct labor and manufacturing overhead.

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Joint products

Joint products are multiple products generated by a single production process at the same time. These products incur undifferentiated joint costs until a split-off point, after which each product incurs separate processing. Prior to the split-off point, costs can only be allocated to the joint products.

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By-product costing and joint product costing

A joint cost is a cost that benefits more than one product, while a by-product is a product that is a minor result of a production process and which has minor sales.

Joint costing or by-product costing are used when a business has a production process from which final products are split off during a later stage of production. The point at which the business can determine the final product is called the split-off point. There may even be several split-off points; at each one, another product can be clearly identified, and is physically split away from the production process, possibly to be further refined into a finished product. If the company has incurred any manufacturing costs prior to the split-off point, it must designate a method for allocating these costs to the final products. If the entity incurs any costs after the split-off point, the costs are likely associated with a specific product, and so can be more readily assigned to them.

Besides the split-off point, there may also be one or more by-products. Given the immateriality of by-product revenues and costs, byproduct accounting tends to be a minor issue.

If a company incurs costs prior to a split-off point, it must allocate them to products, under the dictates of both generally accepted accounting principles and international financial reporting standards.  If you were not to allocate these costs to products, then you would have to treat them as period costs, and would charge them to expense in the current period. This may be an incorrect treatment of the cost if the associated products were not sold until some time in the future, since you would be charging a portion of the product cost to expense before realizing the offsetting sale transaction.

Allocating joint costs does not help management, since the resulting information is based on essentially arbitrary allocations. Consequently, the best allocation method does not have to be especially accurate, but it should be easy to calculate, and be readily defensible if it is reviewed by an auditor.

How to Allocate Joint Costs

There are two common methods for allocating joint costs. One approach allocates costs based on the sales value of the resulting products, while the other is based on the estimated final gross margins of the resulting products. The calculation methods are as follows:

  • Allocate based on sales value. Add up all production costs through the split-off point, then determine the sales value of all joint products as of the same split-off point, and then assign the costs based on the sales values. If there are any by-products, do not allocate any costs to them; instead, charge the proceeds from their sale against the cost of goods sold. This is the simpler of the two methods.
  • Allocate based on gross margin. Add up the cost of all processing costs that each joint product incurs after the split-off point, and subtract this amount from the total revenue that each product will eventually earn. This approach requires additional cost accumulation work, but may be the only viable alternative if it is not possible to determine the sale price of each product as of the split-off point (as was the case with the preceding calculation method).

Price Formulation for Joint Products and By-Products

The costs allocated to joint products and by-products should have no bearing on the pricing of these products, since the costs have no relationship to the value of the items sold. Prior to the split-off point, all costs incurred are sunk costs, and as such have no bearing on any future decisions – such as the price of a product.

The situation is quite different for any costs incurred from the split-off point onward. Since these costs can be attributed to specific products, you should never set a product price to be at or below the total costs incurred after the split-off point. Otherwise, the company will lose money on every product sold.

If the floor for a product’s price is only the total costs incurred after the split-off point, this brings up the odd scenario of potentially charging prices that are lower than the total cost incurred (including the costs incurred before the split-off point). Clearly, charging such low prices is not a viable alternative over the long term, since a company will continually operate at a loss. This brings up two pricing alternatives:

  • Short-term pricing. Over the short term, it may be necessary to allow extremely low product pricing, even near the total of costs incurred after the split-off point, if market prices do not allow pricing to be increased to a long-term sustainable level.
  • Long-term pricing. Over the long term, a company must set prices to achieve revenue levels above its total cost of production, or risk bankruptcy.

In short, if a company is unable to set individual product prices sufficiently high to more than offset its production costs, and customers are unwilling to accept higher prices, then it should cancel production – irrespective of how costs are allocated to various joint products and by-products.

The key point to remember about the cost allocations associated with joint products and by-products is that the allocation is simply a formula – it has no bearing on the value of the product to which it assigns a cost. The only reason we use these allocations is to achieve valid cost of goods sold amounts and inventory valuations under the requirements of the various accounting standards.

ACC2232 – Process Costing

Process Costing

Process costing is a costing method used when it is not possible to identify separate units of production, or jobs, usually because of the continuous nature of the production processes involved. Process costing traces and accumulates direct cost, and allocates indirect cost incurred during a manufacturing process.

The following are examples of some of the industries which use process costing:

  1. Oil refineries
  2. Soap manufacturers
  3. Paint manufacturers
  4. Sugar manufacturers

Features of Process Costing

The following features distinguish process costing from other costing methods:

a) The continuous nature of production in many processes means that there will usually be closing work in progress which must be valued. In process costing it is not possible to build up a cost record of the cost incurred on individual units of output because production in progress is an indistinguishable homogeneous mass.

b) The output of one process becomes the input of the next,unless it is the final process, culminating in the finish product.

c) Losses often occur during the process due to spoilage, wastage, evaporation and so on.

d) Output from production may be a single product, but depending on the industry there may also be by-products and joint products.

Process accounts are used to accumulate the cost incurred during a process. The following four step approach is used to complete the process accounts, minimizing the chances of error:

i. Determine output and losses

ii. Calculate cost per unit of output, losses and work in progress

iii. Calculate total cost of output, losses and work in progress

iv. Complete accounts


The input to a process is 2,000 units at a cost of $ 9,000. Normal loss is 10%. No opening and closing stocks. Complete the process accounts if output is 1660 units


Before solving the example, the following points should be noted.

a. Normal loss is given no share of cost. Therefore, the cost of output will be based on 90% of units completed i.e. 2,000 @ 90% = 1,800

b. Abnormal loss will be given a cost. Abnormal loss=Total loss – Normal loss

Step 1:

Now, to complete the process account the first step is to determine output and losses

Total Input = 2,000
Output = 1,660
Normal Loss = 200
Abnormal Loss = 140

Step 2:

Calculate cost per unit of output and losses

Total Cost Incurred / Expected Output = 9,000 / 1,800 = $5 per unit

Step 3:

Calculate total cost of output and losses

Output = $8,300
Normal Loss = Nil
Abnormal Loss = $700

Step 4:

Process accounts



Amount ($)



Amount ($)

Cost Incurred



Normal Loss



Abnormal Loss













Neo Pharma process a product through three distinct stages, these production of on process being passed on to the next process and so on to the finished product. Details of the cost incurred in each process are given below.

Process A  Process B  Process C
Raw Material 1000 800 200
Direct Wages 500 600 700
Direct Expenses 150 250 500

The overhead expenses or the period amount to RM 3600 and is to be distributed to the process on the basis of direct wages.

There were no stocks in any of the process either at the beginning or at the close of the period.

Assuming the output was 1000 kilos, show the process cost of A, B and C indicating also the cost per kilo of each element of cost and the output in each process.

If 10% of the output is lost in storage and giving samples, what should be the selling price per unit to make a gross profit of 33.33% on the selling price.

Process A Account 

Debit Amount Credit Amount
Raw Material 1000 Process B Account 2650
Direct wages 500
Direct Expenses 150
Overheads 1000
2650 2650

Process B Account 

Debit Amount Credit Amount
Process A Account 2650 Process C Account 5500
Raw Material 800
Direct Wages 600
Direct Expenses 250
Overhead 1200
5500 5500

Process C Account 

Debit Amount Credit Amount
Process B Account 5500 Finished Stock Account 8300
Raw Material 200
Direct Wages 700
Direct Expenses 500
Overhead 1400
8300 8300

If 10% is lost
Total Output = 900 Kgs
Total Cost = RM 8300
Cost Per Kg = 8300 / 900 = RM9.22
Selling Price to earn 33.33% on Selling price
Cost price = 100 – 33.33 = RM66.67
If cost is RM66.67, sale value = 100
If cost is RM1, sale value = 100 / 66.67
If cost is RM 8300, sale value = 100/66.67 X 8300 = 12449.37
Selling price per unit = 12449.37/900 = RM 13.83

– from