COST ACCOUNTING

ASSIGNMENT – 5
5. In a factory the product passes through two processes A and B. A loss of 5% is
allowed in process A and 2% in process B, nothing could be realised by disposal of
wastage. During April, 10,000 units of materials costing Rs 6 per unit were introduced
in process A. The other costs are as follows: Materials Labour Overheads Process A -
10,000 6,000 Process B 6,140 6,000 4,600 The output was 9,300 units from process, A
9,200 units were produced by process B, which were transferred to the warehouse.
8000 units of the finished products were sold @ Rs 15 per unit, the selling and
distribution expenses were RS 2 per unit.

Process A a/c
Particulars Units amount particulars units Amount

To units 10,000 60,000 By normal loss 500

introduced (10,000*5%)
(10000*6)
To labour 10,000 By abnormal loss 200 1600

To overheads 6,000 By Process B a/c 9,300 74,400

10,000 76,000 10,000 76,000

Process B a/c
Particulars Units amount particulars units Amount

To process A a/c 9,300 74,400 By normal loss 186

(9300*2%)
To materials 6,140 By finished stock a/c 9,200 92,000

To labour 6,000

To overheads 4,600

To abnormal gain 86 860

9,386 92,000 9,386 92,000

Working notes:
1. Abnormal loss = 76,000-0/10,000-500 * 200 = 1600
2. Abnormal gain= 91,140/9,114*86 = 860
8. A Product is obtained after passing it through three processes. The following
information is collected for April: Process I Process II Process III Direct Materials
Direct Wages Output in units during the month Normal Loss Value of scrap per unit
5,200 4,000 950 5% 4 3,960 6,000 840 10% 8 5,942 8,000 750 15% 10 Additional
information 1,000 units at Rs 6 each were introduced in process I. There was no stock of
materials or work-in-progress at the beginning or at the end of that month. The
production overhead was Rs 18,000 for that month. Prepare the process Accounts
indicating Normal Loss, Abnormal Loss and Abnormal Gain.
Process I a/c

Particulars Units amount particulars units Amount

To units introduced 1,000 6,000 By normal loss 50 200

(1,000*5%)
To materials 5,200 By process II a/c 950 19,000

To wages 4,000

To overhead 4,000

1,000 19,200 1,000 19,200

Process II a/c

particulars Units Amount particulars Units Amount

To process I a/c 950 19000 By normal loss 95 760

(950*10%)
To materials 8000 By abnormal loss 15 776

To wages 12000 By process III a/c 840 43,464

To overhead 6000

950 45,000 950 45,000

Working notes: Abnormal loss = 45000 – 760/ 950 – 95* 15 = 776

PROCESS III a/c

Particulars Units amount Particulars units Amount

To process II a/c 840 43,464 By normal loss 126 1,260

(840*15%)

To material 5942 By finished stock a/c 750 67380

To wages 8000

To overhead 8000
 To abnormal gain 36 3234

876 68640 876 68640

Working notes: Abnormal gain: 65406 – 1260/ 840 – 126 * 36 = 3234

Abnormal loss a/c

Particulars units amount particulars units Amount
To process II 15 776 By cash (15*6) 15 90
By costing p/l 686
a/c
15 776 15 776

Abnormal gain a/c

Particulars units amount particulars units Amount
By normal loss 36 216 By process III 36 3234
By costing p/l a/c 3018
36 3234 36 3234

Particulars units amount particulars units A

To process I 50 200 By abnormal gain 36
To process II 95 760 By cash a/c 235 2
To process III 126 1,260
271 2220 271 2
Normal loss a/c

12. In a process 10,000 units of materials are introduced at a cost of RS 2 per unit. The
amount spent on wages and overheads are Rs 26,400 and Rs 14,700 respectively. 10% of
the units put into process are normally lost which have a realisable value of 65P each.
The actual output during the period is 7,500 units. The work-In-Progress at the end of
the period is 1,000 units. The degree of completion of work-in-progress is material 60%,
Labour 80% and overhead 40%. You are required to prepare: a) Statement of
Equivalent Production b) Statement of cost c) Statement of evaluation d) Process
Account.

Statement of equivalent production

Column Colu Colum Colu Column Colu Column Colu Column
Column5
1 mn2 n3 mn4 6 mn7 8 mn9 10
Outpu Equivalent
Input              
t Production
Over
Unit Unit Lab
Items Items Materials     head  
s s our
s
% of % of % of
Unit
/       Units completi completi Units completi
s
on on on
Units
Units introdu
1000
introduc ced, 7500 7500 100% 7500 100% 7500 100%
0
ed comple
ted

and
transfer
    red to              
next
process
                   
Normal
    1000 / / / / / /
loss
                   
Abnor
    mal 1500 1500 100% 1500 100% 1500 100%
loss
                   
    Closin 1000 600 60% 800 80% 400 40%
g WIP
                   
        2100   2300   1900  

Statement of cost on equivalent production

 Elements Cost Equivalent Production Units Cost Per unit
Materials:      
Units introduced 20000    
(-) Scrap Value (1000 units * 65 p) 650    
  19350 2100 9.21
Wages 26400 2300 11.48
Overheads 14700 1900 7.74
     
  60450   28.43

Statement of Evaluation
Elements Equivalent Cost Per Unit Cost Total Cost
Production
Units completed and        
transferred:
Materials 7500 9.21 69075  
Wages 7500 11.48 86100
Overheads 7500 7.74 58050 213225
       
Abnormal loss:        
Materials 1500 9.21 13815  
Wages 1500 11.48 17220
Overheads 1500 7.74 11610 42645
       
Closing WIP:        
Materials 600 9.21 5526  
Wages 800 11.48 9184
Overheads 400 7.74 3096 17806
         
Total       273676

Process account
Particulars Units Amount Perticulars Units Amount2
To units 10000 20000 By normal loss A/c 1000 650
introduced
       (10% on 10000 * 0.65)    
To materials   / By abnormal loss A/c 1500 42645
To Wages   26400 By units transferred to 7500 213225
      next process A/c    
To overheads   14700 By closing WIP 0 0
         
  10000 256520   10000 256520

17. Product ‘N’ passes through three processes. In April, the following information is obtained in
respect of process II. Opening Stock: 2,800 units valued at Rs 1,200 made up of Rs 700 for materials,
Rs 150 for labour and Rs 350 for overhead. Degree of completion: Material 60%, Labour 40%,
Overhead 40%. Transfer from Process I: 14,000 units @ Re 0.20 each. Transfer to Process III: 12,000
units Direct Materials added in process II 1,560 Direct labour amounted to 2,000 Production overhead
incurred 4,400 Units scrapped: 2,000 on completion of Process II Closing Stock: 2,800 units Degree of
completion: materials 80%, Labour 60%, overheads 60%. Note: 10% loss during production
considered normal loss. Units scrapped realised Re 0.40 each. Prepare a statement of cost of Process II
and show the unit cost of unit transferred to Process III using FIFO method

Colu Col Colum Col Column5 Colum Column7 Colum Column9 Colum
mn1 um n3 um n6 n8 n10
n2 n4
Items Uni Items Uni Materials   Materials   Labour  
ts ts of process of process and
I II Overhead
s
/       Units % of Units % of Units % of
comple comple comple
tion tion tion
Open 280 Compl 280 / / 1680 60% 1120 40%
ing 0 eted 0
WIP WIP
                   
Tran 140 Compl 120 12000 100% 12000 100% 12000 100%
sferre 00 eted 00
d and
from transfe
rred
proce   to              
ss I proces
s II
                   
    Norma 140 / / / / / /
l Loss 0
                   
    Abnor 600 600 100% 480 60% 360 60%
mal
loss
                   
    Closin 280 2800 100% 2240 80% 1680 60%
g WIP 0
        15400   16400   15160  

Statement of equivalent production

Items Uni Items Units Mater   Materials of   Labour and  

ts ials of process II Overheads
proce
ss I
/       Units % of Units % of Units % of
completion completion completion
Opening 280 Complete 2800 / / 1680 60% 1120 40%
WIP 0 d WIP
                   
Transfe 140 Complete 12000 12000 100% 12000 100% 12000 100%
rred 00 d and
from transferre
d
process   to process              
I II
                   
    Normal 1400 / / / / / /
Loss
                   
    Abnormal 600 600 100% 480 60% 360 60%
loss
                    
    Closing 2800 2800 100% 2240 80% 1680 60%
WIP
        15400   16400   15160  

Statement of cash on equivalent production

Equivalent
Elements Cost Cost Per unit
Production Units
Materials from process I 2800    
(-) scrap value (1400 * 0.40) 560    
  2240 15400 0.15
(+) Additional materials 1500 16400 0.09
Labour 2000 15160 0.13
Overheads 4400 15160 0.29
     
  10140   0.66

Statement of evaluation
Column Column Column Column
Column1
2 3 4 5
Opening WIP:        
Materials of I / 0.15 / /
Materials 1680 0.9 1512  
Labour 1120 0.13 145.6  
Overheads 1120 0.29 324.8 1982.4
       
Units completed and transferred to process II:        
Materials of I 12000 0.15 1800  
Materials 12000 0.9 10800  
Labour 12000 0.13 1560  
Overheads 12000 0.29 3480 15840
       
Abnormal Loss:        
Materials of I 600 0.15 90  
Materials 480 0.9 432  
Labour 360 0.13 46.8  
Overheads 360 0.29 104.4 583.2
        
Closing WIP        
Materials of I 2800 0.15 420  
Materials 2240 0.9 2016  
Labour 1680 0.13 218.4  
Overheads 1680 0.29 487.2 2721.6
         
Total       3304.8

By normal loss
To Opening WIP 2800 1200 1400 560
A/c
(10% on 14000 *
         
0.40)
By abnormal loss
To transfer from 14000 2800 600 583.2
A/c
process I          
By transfer to
To Marerials   1560 12000 15840
finished
      stock A/c    
To labour   2000 By Closing WIP 2800 2721.6
To Overheads   4400      
         
  16800 11960   16800 19704.8

Process account