Solve Question Q.

2:
WARIS Company uses process costing. All materials are added at the beginning of the process.
The product is inspected when it is 80% converted, and spoilage is identified only at the point.
Normal spoilage is expected to be 5% of good output. During March 10,500 units were put into
process. Current costs were Rs.52,500 for materials, Rs.39,770 for labor, and Rs.31,525 for
factory overhead. The 3,000 units still in process at the end of March were estimated to be 90%
complete. A total of 7,000 units were transferred to finished goods.

Required: prepare a cost of production report for March

Solution:

WARIS Company Cost of Production Report

For March 20 --

Units started: 10,500

Units Transferred to Finish Goods 7,000
Units in Process 3,000
Units lost in process 5% (normal) 500 10,500

Cost charged to department Total Per Unit

Material 52,500 5.00
Labor 39,770 3.79
FOH 31,525 3.00
Total Cost incurred 123,795 11.79

Cost Accounted for:

Units Transferred to finish goods (7000 x 11.79) 82,530
Units in process (3000 x 11.79 x 0.9) 31,833
Units Lost (500 x 11.79) 5,895
Further cost (3000 x 11.79 x 0.1) 3,537
Total 1213,795