ss COST ACCOUNT ae ‘The following three statements are prepared for computation of equivalent production and its evaluation: 1, Statement of Equivalent Production 2. Statement of Cost 3. Statement of Evaluation The valuation of work-in-progress can be made in the following three ways: Case I: When there is no opening stock of work-in-progress, there is only closing work-in-progress and no process losses Inthis case the existence of process losses is ignored. The opening work-in-progress is also not there. Closing work-in-progress is converted into the equivalent Production units on the basis of degree of work completion with regard to materials, labour and production overheads. Ilystration 6 Ltd. introduced 10,000 units in the process out of which 8,000 units are completed and 2,000 units are in progres on ‘which labour and overheads cost is incurred only 50%. The following costs are incurred during the period: Materials 40,000 Labour and Overheads Cost 7,000 Calculate the equivalent production, cost of finished products and work-in-progress and prepare the necessary statements Solution Statement of Equivalent Production Equivalent Production peat | Particulars oe Materials Labour and Overheads % Units % | _Units 30,000 | Units introduced : = | completed Units 8,000 100 8,000 100 8,000 S 2,000 | 100 2,000 50 1,000 Tmo 1oco0 | ec00 [3010 Statement of Cost Elements of Cost Cost (2). Equivalent Units Equivalent Cost per Unit (8) Materials 40,000 10,000 4 Labour and Overheads Cost 27,000 9,000 ee 67,000 7 ‘Statement of Evaluation Details Tlaments of Cost | Equivalent Units | Cost per unit (2) | Cost (®) | Total Cost) Finished Production 8,000 7 56,000 Work-in-Progress Materials 2,000 4 8,000 Labour and Overheads] 3,000 3 |_s000_|__11000 ° 67,000 Case Tl: When there is only closing work-in-progress but with the process loss yeion Jn this case if there is any abnormal loss the equivalent units of abnormal loss are to be calculated. The degres ohne se nis care is always taken as 100% forall elements of costs, ie, materials, labour and overheads. Units of bn0% let sted by good finished production. If normal los is there then the units of normal loss is nat added FP of Sete ducted from production. But if there is any ralable value from units normally scrapped then it shoud be des materials. ‘Abnormal gain will be deducted to obtain equivalent production units. Seanned with CamScannertroduced into Process A sit 5,000 tts Completed and Transferred Saar Normal Loss 20% of input Closing Workin-Progress eo Workin-Progressis complete 100% as to materials and 2 theProcess Account. = Process costs: Materials Labour Overheads Statement of Equivalent Production Input | particulars Output Materials Labour Overheads ues % | units | % | units | 9% | units 5000. | Normal Loss 4,000 S = 5 = = = Finished Goods 3,000 | 100 | 3,000 | 100 |} 3000 | 100 | 3000 Closing Workin-Progress | 1,000 | 100 | 1,000 | 20 200_| 20 200 5,000 5,000 4,000 3,200 3,200 Statement of Cost Elements of Cost Cost (®) Equivalent Units | Cost per Unit (2) Materials 50,000 4,000 12.50 labour 48,000 3,200 15.00 Overheads 48,000 3,200 15.00 1,46,000 [42.50 Statement of Evaluation Details Elements of Cost | Equivalent Units | Cost per Unit (%) [Cost (@) total Cost (@) Finished Goods Materials 3,000 12.50 37,500 Labour 3,000 35.00 45,000 Overheads 3,000 15.00 45,000 | 1,27,500 Cosing Workin-Progress | Materials 4,000 12.50 12,500 Labour 200 15.00 3,000 ‘Overheads 200 15.00 _3,000| _18,500_ a 1,46,000 Process A Account Particulars Units © Particulars Units z ToMaterials 5,000 | 50,000 | By Normal Loss A/c 3000 | - Totabour 143,000 | By Finished Production 3,000 | 1,27,500 T0Overheads 48,000 | By Closing Work-in-Progress 1,000 | 18,500 [Fs;000_| 146,000 5,000 | 1,46,000 St Wh i -kcin-progress : When there is opening as well as closing work in-progres ; cha caiethe oat conplesd wand transferred to the next process may be calculated either by applying First in First Out (a9) Method or Average Method, yy Fist in First Out (FIFO) Method jworkon the ring to this its entering first in the process are completed first. It means that the unfinished “Peting Mock cape fe alo ® hhatever remains incomplete will be out of newly introduced units. Use of FIFO Seanned with CamSearner