Process Costing

Chapter # 12
Process Costing
Cost Accounting
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Process Costing
Chapter # 12
Syllabus ACCORDING TO UNIVERSITY OF KARACHI:
 Process costing.
 Procedure of process costing (FIFO method) cost by department.
 Product flow.
 Cost of production report.
WHAT THE EXAMINER USUALLY ASK?

 Computation of:
o Equivalent production units.
o Unit cost and total per unit cost.
o Cost of units completed and transferred out.
o Cost of work in process ending inventory.
 Cost of production report.
 General entries.
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PROCESS COSTING
A costing system sometimes applied to production carried out by a series of chemical or
operational stages or processes. Its characteristics are that costs are accumulated for the
whole production process and that average unit costs of production are computed at each
stage. Special rules are applied in process costing to the valuation of work in process,
normal loss and abnormal losses.
EQUIVALENT UNITS
Unfinished units of production that remain in a process at the end of a period as work in
process are called equivalent units. Degree of completion are assigned to each cost
classification, which, when applied to the number of units in work in process, give an
equivalent number of completed units. The equivalent units have an impact on the
valuation of opening and closing work in process.
EQUIVALENT PRODUCTION UNITS

Material Labour Overhead
Particulars Equivalent Equivalent Equivalent
Units Units Units
Units completed & transferred to next XXX XXX XXX
department/finished goods
Add: Work in process (ending):
(WIP ending units x % of completion)
Direct material XXX
Direct labour XXX
Factory overhead XXX
Work in process during the period XXX XXX XXX
Less: Work in process (beginning)
(WIP opening units x % of completion)
Direct material (XXX)
Direct labour (XXX)
Factory overhead (XXX)
Equivalent production in units XXX XXX XXX
PER UNIT COST AND TOTAL PER UNIT COST

Equivalent
Particular Cost Per Unit Cost
Units
Cost from preceding department XXX XXX
Direct material XXX XXX XXX
Direct labour XXX XXX XXX
Factory overhead XXX XXX XXX
Total per unit cost XXX XXX
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STATEMENT OF UNITS COMPLETED AND TRANSFERRED TO NEXT

DEPARTMENT / FINISHED GOODS
Cost of Work in Process Opening Inventory:
Cost b/d from last month XXX
Add: Cost Applied During This Month From Work in Process Beginning:
(WIP opening units x % of completion x unit cost of element)
Direct material XXX
Direct labour XXX
Total cost applied during this month from work in process beginning XXX
Total cost of work in process beginning inventory XXX
Add: Remaining Units Completed During This Month:
(Units completed – WIP opening units) x Unit cost
Total cost of remaining units completed XXX
Total cost of units completed and transferred to next department/finished goods XXX
STATEMENT OF COST OF WORK IN PROCESS ENDING INVENTORY

Cost from preceding department XXX
Add: Cost Incurred by This Department:
(WIP ending units x % of completion) x unit cost of element
Direct material XXX
Direct labour XXX
Cost of work in process ending inventory XXX
COST OF PRODUCTION REPORT

Cost of production report is a report prepared periodically by a processing department,
summarizing:
 The units for which the department is accountable and the disposition of those units.
 The costs incurred by the department and the allocation of those costs between
completed and incomplete production.
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Format of Cost of Production Report:

Name of Business
Cost of Production Report
For the Period Ended ______
Particulars Department # 1 Department # 2
Quantity Schedule:
Units started XXX
Units received from preceding department XXX
Units completed and transferred out XXX XXX
Units still in process XXX XXX
XXX XXX
Cost Charged to the Department: Total Unit Total Unit

Cost Cost Cost Cost
Cost from Preceding Department:
Transferred in during the month XXX XX
Cost Added by Department:

Material XXX XX XXX XX
Labour XXX XX XXX XX
Factory overhead XXX XX XXX XX
Total cost added XXX XX XXX XX
Total cost to be accounted for XXX XX XXX XX
Cost Accounted for as Follows:

Cost of units completed and transferred out XXX XXX
Cost of Work in Process Ending Inventory:
Cost from preceding department XXX XXX
Material XXX XXX
Labour XXX XXX
Factory overhead XXX XXX
Total cost of work in process ending inventory XXX XXX
Total cost accounted for XXX XXX
ILLUSTRATION # 1: (SINGLE PROCESS DATA)

The following are the production data for Department A for the first month of operation:
Direct material used Rs.200,000
Direct labour Rs.195,500
Factory overhead Rs.212,500
During the month 10,000 units were placed in production; 7,000 units were completed and
the remaining units are 100% completed as to material and 50% completed as to direct
labour and overhead.
REQUIRED
Compute the following:
(a) Equivalent units of production.
(b) Unit cost.
(c) Total cost of units completed.
(d) Total cost of units in process at the end of the month.
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SOLUTION # 1:
M/S. _____________
Equivalent Production Units
(Department – A)
For the Month Ended _______
Material Labour Overhead
Particulars Equivalent Equivalent Equivalent
Units Units Units
Units completed & transferred to next 7,000 7,000 7,000
department.
Direct material (3,000 x 100%) 3,000
Direct labour (3,000 x 50%) 1,500
Factory overhead (3,000 x 50%) 1,500
Equivalent production in units 10,000 8,500 8,500
M/S. _____________
Unit Cost
(Department – A)
Particular Cost (Rs.) Equivalent Units Per Unit Cost (Rs.)
Direct material 200,000 10,000 20
Direct labour 195,500 8,500 23
Factory overhead 212,500 8,500 25
Total per unit cost 608,000 68
M/S. _____________
Statement of Cost of Units Completed
(Department – A)
Units Completed During This Month: (Rs.)
Units completed x Unit cost
Total cost of units completed (7,000 x 68) 476,000
Total cost of units completed and transferred to next department 476,000
M/S. _____________
Statement of Cost of Work in Process Ending
(Department – A)
Cost Incurred by This Department:
(WIP ending units x % of completion) x unit cost of element (Rs.)
Direct material (3,000 x 100%) x 20 60,000
Direct labour (3,000 x 50%) x 23 34,500
Factory overhead (3,000 x 50%) x 25 37,500
Cost of work in process ending inventory 132,000
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ILLUSTRATION # 2: (SINGLE PROCESS WITH BEGINNING INVENTORY)

The following information is taken from the books of Pak Steel Mills for department I for the
month of March 2001.
Cost of units in process on March 1, 2001 Rs.40,000
Cost of material placed in production Rs.177,600
The data extracted from the production report relating to above process are as follows:
Units in process on March 1, 2001
(80% complete as to material & 50% as to conversion cost) 4,000 units
Units placed in production during March, 2001 22,000 units
Units in hand on March 31, 2001
(90% complete as to material & 75% complete as to conversion cost) 6,000 units
REQUIRED
(a) Equivalent production units.
(b) Per unit cost.
(c) Total cost of units in process on 31 March 2001.
(d) Total cost of units transferred out to department II.
(e) Give necessary General Journal entry to record the transfer of units from
department I to department II.
SOLUTION # 2:
Computation of Number of Units Completed:
Work in process beginning inventory in units 4,000
Add: Units placed in production 22,000
Total work in process during the period 26,000
Less: Work in process ending inventory in units (6,000)
Number of units completed 20,000
Pak Steel Mills

Equivalent Production Units
(Department I)
For the Period March 2001
Particulars Material Labour Overhead
Equivalent Equivalent Equivalent
Units Units Units
Units completed & transferred to next 20,000 20,000 20,000
department
Direct labour (6,000 x 75%) 4,500
Work in process during the period 25,400 24,500 24,500
Less: Work in process (opening):
Direct material (4,000 x 80%) (3,200)
Direct labour (4,000 x 50%) (2,000)
Factory overhead (4,000 x 50%) (2,000)
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Pak Steel Mills
Per Unit Cost
(Department I)
Particular Cost Equivalent Units Per Unit Cost
Direct material 177,600 22,200 8.00
Direct labour 112,500 22,500 5.00
Factory overhead 135,000 22,500 6.00
Total per unit cost 425,100 19.00
Pak Steel Mills

Statement of Work in Process Ending Inventory
(Department I)
Direct material (6,000 x 90% x 8) 43,200
Direct labour (6,000 x 75% x 5) 22,500
Factory overhead (6,000 x 75% x 6) 27,000
Pak Steel Mills

Statement of Units Completed & Transferred to Next Department
(Department I)
Cost b/d from last month 40,000
Direct labour (4,000 x 50% x 5) 10,000
Total cost applied during this month from work in process beginning 28,400
Total cost of work in process beginning inventory 68,400
Total cost of remaining units completed (16,000 x 19) 304,000
Total cost of units completed and transferred to next department 372,400
Pak Steel Mills

General Journal
Date Particulars P/R Debit Credit
1 Work in process – Department II 372,400
Work in process – Department I 372,400
(To record the units completed and transferred to
next department)
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ILLUSTRATION # 3: (COST OF PRODUCTION REPORT)

ABC Company’s department “B” costs for January, 2003 were as follows:
Cost from department “A” Rs. 5,000
Cost added in department “B”
Material Rs. 20,000
Labour 25,200
Factory overhead 33,600
The quality schedule shows 10,000 units received during the month from department “A”,
6,000 units were transferred to finished goods; and 4,000 units in process at the end of
January were 100% complete as to material and 60% complete as to conversion cost.
REQUIRED
Prepare cost of production report.
SOLUTION # 3:
ABC Company
Cost of Production Report
For the Period January 2003
Particulars Department – B
Quantity Schedule:
Units received from department – A 10,000
Units completed and transferred out 6,000
Units still in process 4,000
10,000
Cost Charged to the Department - B: Total Cost Unit Cost
Cost from Department - A:
Transferred in during the month (5,000 / 10,000) 5,000 0.50
Cost Added by Department – B:

Material (20,000 / 10,000) 20,000 2.00
Labour (25,200 / 8,400) 25,200 3.00
Factory overhead (33,600 / 8,400) 33,600 4.00
Total cost added 78,800 9.00
Total cost to be accounted for 83,800 9.50
Cost Accounted for as Follows:

Cost of units completed and transferred out (6,000 x 9.50) 57,000
Cost of Work in Process Ending Inventory:
Cost from department – A(4,000 x 0.5) 2,000
Material (4,000 x 100% x 2.00) 8,000
Labour (4,000 x 60% x 3.00) 7,200
Factory overhead (4,000 x 60% x 4.00) 9,600
Total cost of work in process ending inventory 26,800
Total cost accounted for 83,800
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ABC Company
Equivalent Production Unit
(Department – B)
For the Period January 2003
Equivalent Equivalent Units Equivalent Units
Units
Units completed & transferred out 6,000 6,000 6,000
(WIP ending units x % of
completion)
Direct labour (4,000 x 60%) 2,400
ILLUSTRATION # 4: (MULTIPLE DEPARTMENTS DATA)

The following information relates to the goods in process No. 3 of Mustafa Manufacturing
for the month of November 2004:
Goods in process inventory beginning (40,000 units 100% complete as to Rs.774,000
material and 75% complete as to conversion cost)
Cost of 140,000 units transferred in from process No. 2 during November Rs.1,400,000
Manufacturing cost added in process No. 3, during November:
Direct material Rs.560,000
Rs.3,734,000
On November 30, 50,000 units are still in process No. 3 which is 100% complete as to
material and 50% complete as to conversion cost.
REQUIRED
(a) Compute:
(1) Equivalent units of production.
(2) Cost per unit.
(3) Cost of units transferred out of finished goods using FIFO.
(4) Cost of units in process on November 30, 2004.
(b) General Journal entries to record:
(1) Transfer of 140,000 units from process No. 2 to process No. 3.
(2) Manufacturing cost added in process No. 3 during November.
(3) Transfer of 130,000 units from process No. 3 to finished goods warehouse.
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SOLUTION # 4:
Mustafa Manufacturing
Equivalent Production Units (Process No. 3)
For the Period Ended November 2004
Equivalent Equivalent Equivalent
Units Units Units
Units completed & transferred to finished 130,000 130,000 130,000
goods
Direct labour (50,000 x 50%) 25,000
Work in process during the period 180,000 155,000 155,000
Less: Work in process (opening):
Direct material (40,000 x 100%) (40,000)
Direct labour (40,000 x 75%) (30,000)
Factory overhead (40,000 x 75%) (30,000)
Per Unit Cost (Process No. 3)
Particular Cost Equivalent Units Per Unit Cost
Cost from process No. 2 1,400,000 140,000 10
Direct material 560,000 140,000 4
Direct labour 250,000 125,000 2
Factory overhead 750,000 125,000 6
Total per unit cost 2,960,000 22
Statement of Units Completed and Transferred to Finished Goods
Process No. 3
Cost b/d from last month 774,000
Direct labour (40,000 x 25% x 2) 20,000
Total cost applied during this month from work in process beginning 80,000
Total cost of work in process beginning inventory 854,000
Total cost of remaining units completed (90,000 x 22) 1,980,000
Total cost of units completed and transferred to finished goods 2,834,000
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Statement of Work in Process Ending Inventory
(Process No. 3)
Cost from process No. 2 (50,000 x 10) 500,000
Direct labour (50,000 x 50% x 2) 50,000
General Journal
Date Particulars P/R Debit Credit
1 Work in process (Process 3) 1,400,000
Work in process (Process 2) 1,400,000
(To record the goods completed and transferred
to next process)
2 Work in process (Process 3) 1,560,000
Raw material 560,000
Accrued payroll 250,000
(To record the manufacturing cost of process 3)
3 Finished goods 2,834,000
Work in process (Process 3) 2,834,000
(To record the goods completed and transferred
to finished goods)
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PRACTICE QUESTIONS
Question # 1:
The following are the production data for Department A for the first month of operation:
Direct material used Rs.169,950
During the month 8,250 units were placed in production; 7,700 units were completed and
the remaining units are 100% completed as to material and 30% completed as to direct
labour and overhead.
REQUIRED
(b) Unit cost of material used, labour, and factory overhead.
(d) Total cost of units in process at the end of the month.
Question # 2:
Given below are the production data for department No. 1 for the first month of operation:
Inputs to Department:
Material 1,200 units Rs.120,000
During the first month 960 units were completed and the remaining 240 units were 100%
completed as to material and 75% completed as to conversion cost.
REQUIRED
(b) Unit cost of material used, labour, and factory overhead.
(c) Total cost of 960 units completed.
(d) Total cost of 240 units in process at the end of the month.
Question # 3:
Mansoor Industries Limited uses a process cost system of three processes, the following
data relates to its process – 01:
Beginning inventory Rs.208,000
Raw material used Rs.325,000
Direct labour cost used Rs.478,400
Factory overhead cost applied Rs.358,800
The data extracted from a quality schedule relating to the above process are as follows:
Units
Units in process beginning 169,000
(100% complete as to material, 70% as to conversion cost)
Units placed in production 617,500
Units completed 520,000
Units still in process at the end 90% complete as to material and 50% complete as to
conversion cost.
REQUIRED
Compute the equivalent production units, the unit cost, the total cost of unit completed and
the total cost of units in process at end.
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Question # 4:
The following information was taken from the records of Faisal Manufacturing Co. for the
month of January 2006.
Cost of units in process on January 1, 2006 Rs.42,000
Cost of raw material used Rs.113,960
Direct labour cost incurred Rs.90,720
Factory overhead cost incurred Rs.60,480
The data extracted from the production report relating to above process is as follows:
Units in process at end of January 2006 4,200 units
(60% complete as to material and 80% complete as to conversion cost)
Units placed in production during the month 18,200 units
Units in process on January 1, 2006 7,000 units
(40% complete as to material and 60% complete as to conversion cost)
REQUIRED
(a) Equivalent production during the month. (b) Unit cost.
(c) Cost of units completed.
(d) Cost of ending inventory of goods in process.
(e) Journal entries to record cost allocated to production and cost of goods completed
during the month.
(f) Cost of production report.
Question # 5:
The information relate to a production operated by Raza Corporation during the month of
October 2003:
Beginning inventory in process Rs.136,200
Direct labour used Rs.270,000
Applied factory overhead (90% of direct labour cost) Rs.243,000
Production report for October 2003:
Units in process October 1st
(100% complete as to material 50% complete as to conversion cost) 18,000 units
Units put into process during October 96,000 units
Units completed and transferred to next department 84,000 units
Units in process October 31
REQUIRED
(a) Determine:
(1) Equivalent production in units.
(2) Cost of one unit.
(3) Cost of units transferred to next department. Use FIFO.
(4) The value of units in process on October 31, 2003.
(b) Give journal entries to record the cost allocated to production and the cost of units
completed during October 2003.
(c) Cost of production report.
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Question # 6:
Information relating to goods in process in Frame Department of Sohrab Cycle
Manufacturing Co. during the month of September 1993 is as under:
Beginning inventory in process Rs.72,640
Direct labour used Rs.114,000
Production Report for September 1993:
Units in process September 1st
Units put into process during September 51,200 units
Units completed and transferred to painting department 44,800 units
Units in process September 30
REQUIRED
(a) Determine:
(3) Cost of units transferred to painting department.
(4) The value of units in process on September 30, 1993.
completed during September 1993.
Question # 7:
Information relating to goods in process in Cap Department of Eagle Pen Manufacturing
Company during the month of August 1992 is as under:
Beginning inventory Rs.25,500
Material cost Rs.127,500
Labour cost Rs.91,290
Overhead cost Rs.60,860
Production Report for August 1992:
Units in process August 1st (80% complete as to material,
70% complete as to labour and overhead) 8,500 units
Units put into process during August 34,000 units
Units completed and transferred to holder department 27,200 units
Units in process August 31 (75% complete as to material,
60% complete as to labour and overhead) 15,300 units
REQUIRED
(a) Determine:
(3) Cost of units transferred to holder department.
(4) The amount of goods in process on August 31.
completed during August 1992.
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Question # 8:
The following information pertains to the goods in process in the lock assembly department
during the month of December 1985:
Beginning inventory of goods in process Rs.39,600
Materials used Rs.142,200
Rs.684,000
Production Report for December:
Units in process December 1 (100% complete as to material and 75%
complete as to labour and factory overhead) 5,400 units
Units put into process during December 72,000 units
Units completed and transferred to painting department 68,400 units
Units in process December 31, (90% complete as to material and 60%
REQUIRED
(a) Determine:
(2) Unit cost for December.
(3) Total cost of units completed.
(4) Cost of units in process on 31 December 1985.
(b) Entry in General Journal to record the transfer of production from the lock assembly
department to the painting department.
Question # 9:
Shafique & Company has one department and uses a process cost system. The following
data related to its process:
Units in process November 1, Units 1,900
(40% complete as to material and 60% complete as to conversion costs)
Cost of units in process November, 1 Rs.24,130
Units placed in production during November Units 7,600
Factory overhead applied Rs.95,760
Units in process November 30 (75% complete as to material and
80% complete as to conversion costs) Units 2,850
REQUIRED
(b) Unit cost for November.
(d) Cost of units in process on November 30.
(e) Cost of production report.
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Question # 10:
The information below relates to a production operated by Noora Corporation during the
month of October 1993:
Units in process October 1, 1993 Units 6,000
(90% completed as to material and 70% completed as to conversion costs)
Cost of units in process October 1, 1993 Rs.25,400
Units placed in production during October 1993 Units 40,000
Factory overhead incurred on account Rs.140,000
Units in process October 31, 1993 (85% complete as to material and
60% complete as to conversion costs) Units 8,000
REQUIRED
(a) Compute equivalent full units completed of materials and conversion costs.
(b) Compute unit cost of material, labour and factory overhead.
(c) Determine cost of transferred units of finished goods inventory (use FIFO method).
(d) Determine cost of ending inventory of goods in process.
(e) Prepare journal entries to record the cost allocated to production, the cost of goods
completed during October 1993.
(f) Cost of production report.
Question # 11:
Iyra Pharma Company processes a product through three distinct stages. The product of
one process is being passed on to the next process and so on to the finished product intact.
Details of the cost incurred in process No. 1 is given below for the month of November
2009.
Cost of units in process on November 1, 2009 Rs.198,000
Direct labour used (125% of factory overhead) Rs.220,000
Factory overhead applied Rs.?
The data extracted from the production report relating to above processes are as follows:
Units in process on November 1, 2009 16,500 units
(60% completed as to material & 80% as to conversion cost)
Units placed in production 44,000 units
Units in process on November 30, 2009 11,000 units
(40% completed as to material & 50% as to conversion cost)
REQUIRED
(b) Per unit cost.
(c) Total cost of units completed and transferred to next process (Process No. 2).
(d) Total cost of units in process on November 30, 2009.
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Question # 12:
The following information is taken from the books of Pak Steel Mills for department I for the
month of March 2001.
Cost of units in process on March 1, 2001 Rs.48,000
Direct labour Rs.?
Factory overhead (120% of direct labour cost) Rs.162,000
The data extracted from the production report relating to above process are as follows:
Units in process on March 1, 2001
(80% complete as to material & 50% as to conversion cost) 4,800 units
Units placed in production during March, 2001 26,400 units
Units in hand on March 31, 2001
(90% complete as to material & 75% complete as to conversion cost) 7,200 units
REQUIRED
(a) Compute:
(1) Equivalent production units.
(2) Per unit cost.
(3) Total cost of units in process on March 31, 2001.
(4) Total cost of units transferred out to department II.
(b) Give necessary General Journal entry to record the transfer of units from
department I to department II.
Question # 13:
Rahat and Co. have the following data, during the month of June 2003:
Units started in production 6,500 Units
Units finished 3,900 Units
Units still in process:
(60% as to material and 40% as to conversion) 1,950 Units
Balance is lost in process (Normal loss)
Material cost Rs. 15,210
Direct labour cost Rs. 18,720
Factory overhead cost Rs. 23,400
REQUIRED
Calculate the cost of finished goods.
Question # 14:
Atique Company’s department “B” costs for January, 2003 were as follows:
Cost from department “A” Rs. 70,000
Cost added in department “B”
Material Rs. 280,000
Labour Rs. 352,800
Factory overhead Rs. 470,400
The quality schedule shows 140,000 units received during the month from department “A”,
84,000 units were transferred to finished goods; & 56,000 units in process at the end of
January were 100% complete as to material and 60% complete as to conversion cost.
REQUIRED
Prepare cost of production report.
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Question # 15:
Babar Manufacturing Company uses a process cost system. The costs of department 2 for
the month of May, 2010 were as follows:
Cost from the proceeding department Rs.300,000
Cost added by the department:
Material cost Rs.324,300
Labour cost Rs.131,100
Factory overhead cost Rs.96,600
The following information was obtained from the department’s quantity schedule:
Units received 75,000 units
Units completed and transferred out 60,000 units
Units still in process (60% completed as to material & conversion cost) 15,000 units
REQUIRED
Prepare a Cost of Production Report of department 2 for May, 2010 using FIFO Method.
Question # 16:
Kamran Manufacturing uses process cost system. The costs of process 2 for the month of
May were as under:
Cost from preceding process Rs. 90,000
Cost Added by the Process:
Material Rs. 98,172
Labour Rs. 34,992
Factory overhead Rs. 18,468
Following information was obtained from the department quantity schedule:
Units received 11,250
Units transferred 9,000
Units still in process 2,250
The degree of completion of work in process was 50% of the units were 40% complete,
20% of the units were 30% complete and the balance of the units was 20% complete.
REQUIRED
(a) Prepare cost of production report for department 2 for May 2006.
(1) Transfer of 11,250 units from preceding department to process 2.
(2) Manufacturing cost added in process 2 during May 2006.
(3) Transfer of 9,000 units from process 2 to finished goods warehouse.
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Question # 17:
The following information pertains to the goods in process No. 3 for the month of December
2007. The company applies FIFO method for inventory valuation:
Goods in process inventory December 1, 2007, 68,000 units 75% complete, cost of
Rs.657,900.
Cost 238,000 units transferred in from process No. 2, during December Rs.1,428,000.
Cost added in process No. 3 during December, direct material Rs.467,500, direct labour
Rs.140,250 and factory overhead Rs.233,750.
On December 31, 85,000 units are still in process No. 3 which is 75% complete as to
materials and 20% complete as to conversion cost.
REQUIRED
Compute:
(a) Number of units completed.
(b) Equivalent units in production.
(c) Cost per unit.
(d) Cost of units completed and transferred to finished goods warehouse.
Question # 18:
The following information pertains to the goods in process No. 3 for the month of
November, 1999:
Goods in process inventory November 1, (72,000 units 100% complete
as to materials and 75% complete as to conversion costs) Rs.696,600
Cost of 252,000 units transferred in from process No. 2 during Nov. Rs.1,260,000
Manufacturing cost added in process No. 3 during November:
Direct material Rs.504,000
REQUIRED
(a) Compute:
(2) Cost per unit.
(3) Cost of units transferred to finished goods warehouse.
(4) Cost of units in process on November 30.
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Question # 19:
The following information relates to the goods in process No. 3 of Mustafa Manufacturing
for the month of November 2004:
Goods in process inventory November 1 (76,000 units 100% complete as Rs.1,470,600
to material and 75% complete as to conversion cost)
Cost of 266,000 units transferred in from process No. 2 during November Rs.2,660,000
Manufacturing cost added in process No. 3, during November
Direct material Rs.1,064,000
Factory overhead Rs.1,425,000
Rs.7,094,600
material and 50% complete as to conversion cost.
REQUIRED
(a) Compute:
(2) Cost per unit.
(3) Cost of units transferred out of finished goods using FIFO.
(4) Cost of units in process on November 30, 2004.
Question # 20:
The following information pertains to the goods in the process No. 3 for November 2005:
Cost of goods in process inventory, November 1, (6,400 units 100% complete as to
materials, and 75% complete as to conversion cost) Rs.779,200
Cost of 22,400 units transferred in from process No. 2 Rs.1,120,000
Manufacturing Costs Added in Process No. 3:
Direct materials Rs.448,000
On November 30, 8,000 units are still in process No. 3, which are 100% complete as to
REQUIRED
(a) Compute:
(2) Cost per unit.
(3) Cost of units transferred to finished goods.
(4) Cost of units in process on November 30.
(b) General journal entries to record:
(2) Manufacturing costs added in process No. 3.
(3) Transfer of 20,800 units from process No. 3 to finished goods.
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Chapter # 12
Question # 21:
Given below is November’s unit and cost data for a manufacturing firm that uses FIFO
costing:
Department 2
Beginning units in process (55% complete as to direct materials, 15% 162,000 units
complete as to conversion cost)
Work – in – process beginning inventory Rs.567,000
Units transferred in during the period 504,000 units
Cost transferred in this period Rs.705,600
Cost Added During This Period:
Direct materials Rs.975,240
Units transferred out to finished goods inventory godown 516,000 units
Ending units in process (25% complete as to direct material, 70% 150,000 units
complete as to conversion cost)
REQUIRED
(a) Calculate the equivalent units for direct materials and conversion costs.
(b) Prepare cost of production report.
Question # 22:
The following information pertains to the goods in process in the fourth process during the
month of July 1990:
Beginning of goods in process inventory (1.7.1990) Rs.535,700
Cost of units transferred in from the third process during July Rs.385,000
Manufacturing cost incurred in July:
Raw materials used Rs.154,000
Rs.1,613,700
Production Report of Fourth Process for July 1990:
Units in process July 1, 1990 (100% complete as to material and 75%
Units transferred in from the third process during July 77,000 units
Units completed and transferred to finished goods store 99,000 units
Units in process July 31, 1990 (100% complete as to material and 50%
REQUIRED
(a) Determine:
(2) Unit cost for July 1990.
(3) Total cost of units completed.
(4) Cost of units in process on 31 July 1990.
(b) Entries in General journal to record:
(1) Transfer of 77,000 units from the third process in the fourth process.
(2) Transfer of 99,000 completed units from the fourth process to the finished
goods store.
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Process Costing
Chapter # 12
Question # 23:
The production and cost data of Alamgir Company for process No. 3 for the period ended 31
December 1988 is as under:
Units Cost (Rs.)
Beginning goods in process (20% completed) 13,000 54,600
Material received from process No. 2 104,000 1,040,000
Direct labour 226,200
117,000 2,225,600
Completed and transferred to finished goods store 97,500 ?
Ending goods in process (60% completed) 19,500 ?
REQUIRED
Supported by computation determine the missing cost data (use FIFO basis).
Question # 24:
A manufacturing concern produced a product in three processes, the information of which
is as under:
Process I Process II Process III
Transferred to next process 2/3 60% ---
Transferred to warehouse for sale 1/3 40% 100%
In each process 4% of the total weight put in is lost and 6% is scrap, which from Process I
realized Rs.3 per Lb. from Process II Rs.5 per Lb. and from Process III Rs.6 per Lb.
The following particular rates are applied:
Raw Material Used:
Process I 19,600 Lbs. at Rs.10/= per Lb.
Process II 2,240 Lbs. at Rs.16/= per Lb.
Process III 17,640 Lbs. at Rs.7/= per Lb.
Manufacturing Wages and Expenses:
Process I Rs.72,128
Process II Rs.43,960
Process III Rs.40,530
REQUIRED
Prepare process accounts showing the cost per Lb.
Question # 25:
Nasr Medicine Inc. uses two processing departments (department X and department Y) to
manufacture its products. The cost accounting department obtained the following
information for the month of September, 2009:
Department X Department Y
Beginning units in process --- ---
Units started in process 60,000 Units ---
Units received from other department --- 52,500 Units
Ending units in process 7,500 Units 7,500 Units
Cost Added by Departments: Rupees: Rupees:
Direct material 47,250 ---
Direct labour 36,270 23,520
Factory overhead applied 32,550 20,160
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Process Costing
Chapter # 12
Work in Process Ending:
Material 100% ---
Conversion cost 1/5 2/3
REQUIRED
(a) Determine the equivalent units of production for each department and unit cost of
product at each department.
(b) Pass the entries in the General Journal for goods completed and transferred to
finished goods.
Question # 26:
Shahjahan Company processes its goods successively in process – A and process – B and
then transfers to finished goods godown. Its records show the following information for the
month of June 1998:
Process – A Process – B
Cost of goods in process (1 June) Rs.24,000 ---
Raw material used Rs.100,800 Rs.54,400
Direct labour used Rs.86,400 Rs.108,800
Factory overhead applied on the basis of direct labour 50% 100%
Production Reports for June:
Units in process – 1 June (1/3 complete) 4,800 units ---
Units completed and transferred out 16,000 units 12,800 units
Units in process – 30 June (1/4 complete) --- 3,200 units
REQUIRED
(a) Equivalent full units of production in process – A and process – B.
(b) Unit cost in process – A and process – B.
(c) Cost of units transferred out of process – A and process – B.
Question # 27:
One of the primary products of Tariq Ltd. is Photorex, a product which is processed in
Department – A and Department – B and then transferred to the company’s sales
warehouse. The flow of product through the departments during the month of December
1996 is shown below:
Department – A
Goods in Process
Input 51,000 units To Department – B 42,500 units
Department – B
Goods in Process
From Department – A 42,500 units To sales warehouse 35,700 units
Departmental manufacturing costs applicable to Photorex production for the month of

December 1996 were as follows:
Page 298
Process Costing
Chapter # 12
Department – A (Rs.) Department – B (Rs.)
Raw materials 38,080 15,912
Factory overhead 23,800 47,736
Unfinished goods in each department at the end of December 1996 were on the average
60% complete with respect to both raw material and processing cost.
REQUIRED
(a) Determine the equivalent full units of production in each department during
December 1996.
(b) Compute unit production cost in each department during December 1996.
(c) Prepare journal entries to record transfer to product out of Department – A and
Department – B during December 1996.
Question # 28:
One of the primary products of Omark Company is Omacron, a product which is processed
successfully in Department – F and Department – G and then transferred to the company’s
sales warehouse. The flow of product through the departments during the month of August
1993 is shown below:
Department – F
Goods in Process
Input 36,000 units To Department – G 28,800 units
Department – G
Goods in Process
From Department – F 28,800 units To sales warehouse 25,200 units
Departmental manufacturing costs applicable to Omacron production for the month of

August 1993 were as follows:
Department – F (Rs.) Department – G (Rs.)
Raw materials 32,400 27,000
Factory overhead 8,100 6,750
Unfinished goods in each department at the end of August 1996 were on the average 50%
complete both with respect to raw materials and processing cost.
REQUIRED
(a) Determine the present status of the 36,000 units put into production in Department
– F during August.
(b) Determine the equivalent completed units of production in Department – F and
Department – G.
(c) Compute unit production costs in each department during August.
(d) Prepare the necessary journal entries to record.
Page 299
Process Costing
Chapter # 12
Question # 29:
The following given information have been obtained from the cost accounts of a factory
producing a commodity in the manufacture of which 3 processes are involved with the facts
that:
(a) The operation in each separate process is completed daily.
(b) The value of which units are to be charged to process – B and C is the cost per unit of
process – A thus B respectively.
Process A (Rs.) B (Rs.) C (Rs.)
Direct wages 192,000 360,000 877,500
Raw material used 720,000 --- ---
Machine expenses 108,000 90,000 108,000
Manufacturing overhead 60,000 67,500 72,000
Units Units Units
Production (Gross) 1,110,000 --- ---
Wastage 30,000 45,000 15,000
Inventory 1 January 1994 --- 120,000 495,000
Inventory 31 December 1994 --- 30,000 165,000
REQUIRED
Prepare process cost accounts showing the cost of the output and the cost per unit at each
stage of manufacture.
Page 300

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Chapter # 12

Syllabus ACCORDING TO UNIVERSITY OF KARACHI:

WHAT THE EXAMINER USUALLY ASK?

EQUIVALENT PRODUCTION UNITS

PER UNIT COST AND TOTAL PER UNIT COST

STATEMENT OF UNITS COMPLETED AND TRANSFERRED TO NEXT

STATEMENT OF COST OF WORK IN PROCESS ENDING INVENTORY

COST OF PRODUCTION REPORT

Format of Cost of Production Report:

Cost Charged to the Department: Total Unit Total Unit

Cost Added by Department:

Cost Accounted for as Follows:

ILLUSTRATION # 1: (SINGLE PROCESS DATA)

ILLUSTRATION # 2: (SINGLE PROCESS WITH BEGINNING INVENTORY)

Pak Steel Mills

Pak Steel Mills

Pak Steel Mills

Pak Steel Mills

ILLUSTRATION # 3: (COST OF PRODUCTION REPORT)

Cost Added by Department – B:

Cost Accounted for as Follows:

ILLUSTRATION # 4: (MULTIPLE DEPARTMENTS DATA)

Departmental manufacturing costs applicable to Photorex production for the month of

Departmental manufacturing costs applicable to Omacron production for the month of

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