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Problem 1: (Normal / Abnormal Loss) Working Notes:

Total Cost Incresed−sales value of Scrape
Prepare a Process Account and Abnormal Loss Account from the following information. i. Cost of abnormal Loss= Input Units−Normal Units
×Abnormal Units
The input of Raw material 1000 units @ Tk. 20 per 36200−400
= 1000−50 ×50
Unit Direct Material Tk.4,200/-
Direct Wages Tk.6,000/- = Tk.1884
Production Overheads Tk. 6,000/- ii. It has been assumed that units of abnormal loss have also been sold at the same rate
Actual output transferred to process II 900 units i.e. of Normal Scrap.
Normal Loss 5% Problem:2
Value of Scrap per unit Tk.8/- Process –I Process- Finished
Solution: (Tk.) II(Tk.) Goods(TK)
Process I A/C
Direct Materials 30000 15 -
Dr. Cr.
Particulars Units Amount Particulars Units Amount Direct Labor 20000 30 -
To Basic material 1000 20000 By Normal Loss 50 400 Direct Overhead 10000 12 -
To Direct Materia 4200 By Abnormal Loss 50 1884 Closing Stock 9000 20 7000
To direct labor 6000 By Process II 900 39,916 Sales of Finished goods amount to Tk. 1,20,000. In each process profit of 25% on the
(Output transfer, price is added. Calculate inter-process unrealized profits and realized gross
transferred to profit.
next processes) Solution: Process-I A/C
To Production 6000 Dr. Cr.
overhead Particulars Total P. Cost Profit Particulars Total P. Cost Profit
36,200 36,200 Direct Materials 30000 30000 - Process-II A/C 68000 51000 17000
Abnormal Gain A/C Direct Labor 20000 20000
Dr. Cr. Factory Overhead 10000 10000
Particulars Units Amount Particulars Units Amount
(Tk.) (Tk.) 60000 60000 -
Less: C. Stock 9000 9000
To, Process- 50 1884 By, Bank A/C 50 400
Process Cost 51000 51000 Process Cost 51000 51000
I A/C
Profit 33.33% on 17000 17000 Profit 33.33% 17000 17000
By, Costing P/L 50 1484 the cost on the cost
50 1884 A/C 50 1884 Transfer Price 68,000 51,000 17000 68000 51000 17000

Process-II A/C 4. Calculation of total profit:

Dr. Cr. Process TK. Tk.
Total P. Cost Profit Total P Cost Profit
Process-1 - 17000
Process 1 A/C 68000 51000 17000 Finishe 140000 90720 49280
Process-2 35000
Direct Materials 15000 15000 d Stock
Less: Provision for Unrealized profit 2720 32280
Direct Labor 30000 30000 A/C
Finished Stock 9000
Factory Overhead 12000 12000
Less: Provision for UP 2464 6536
125000 108000 -
Total Profit 55816
Less: C. Stock 20000 17280 2720
Process Cost 105000 90720 14280 Problem 3: There are three processes in a factory. The following particulars are
(+) Profit 33.33% 35000 - 35000 obtained in respect of the processes for the month of February:
on the cost Process A Process B Process C F. Stock
Transfer Price 140,000 90720 49280 140000 90720 49280 Opening Stock 8000 12000 9000 15000
Finished Stock A/C Closing Stock 12000 6000 25000 20000
Total P. Cost Profit Total P Cost Profit Direct Materials 30000 13000 21000
Direct Labor 40000 25000 20000
Process 2A/C 140000 90720 49280 Sales 142000 86184 55816
Factory Overhead 14000 16000 19000
Less: C. Stock 7000 4536 2464

Sales for the month amounted to Tk. 3,10,000. The output of the previous process is
133000 86184 46816
transferred to the next process and to finished stock at 20% profit on the transfer price.
Profit(142000- 9000 9000
13300)=9000 Stocks in processes are valued at prime cost and finished stock is valued at the price at
142000 86184 55816 142000 86184 55816 which it is received from process C.
1. Profit 25% on Transfer price = 33.33% on cost.
Provisions for unrealized profits on 31st January are:
2. Calculation of production cost and unrealized profit on closing stock:
Tk.
108000
Process 2: Production cost = ×20000 = Tk.17280
125000
Process B 2000
Unrealized profit = Tk. (20000-17280) =Tk. 2720
Process C 2300
90720
Finished Stock: Production cost = × 7000 = Tk.4536
140000 Finished Stock 6498
Unrealized profit = Tk. (7000-4536) =Tk. 2464
Calculate inter-process unrealized profit and total gross profit realized.
3. Provision for Unrealized profit = (Tk. 2720 + Tk. 2464) = Tk. 6184.

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Problem 4: Product X passes through three processes--- process I, process II and process
III- Completion. The output of each process is charged to the next process at a price
calculated to give a profit of 20% on the transfer price and the output of process III is
charged to finished stock on a similar basis. The following information is available for
the year ended 31st December, 20X1:
Process I Process II Process III
Tk. Tk. Tk.
Material consumed 40000 60000 20000
Wage paid 60000 40000 80000
Stock at 31st December 20000 40000 60000
Stock in each process has been valued at prime cost to the process. There was no stock in
hand at January 1 and work-in-process in any processes at December 31. Of the goods
passed into Finished Stock, Tk. 40000 remained in hand at December 31, and the balance
has been sold for Tk. 360000.
Prepare: (i) Process Account and total apparent profits; and (ii) Realized profits.

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Problem 5: The following details are related to the work done in Process ‘X’ Pearson Problem 6: Prepare a statement of equivalent production, statement of cost, and
Company during the month of January 2014: (Average Costing) process account from the following information using the average costing method.
Value in Opening Stock 50,000 Units; Material Tk.25,000
Opening work-in-progress (2,000 units) Labor Tk.10,000
Materials 80,000 Overheads Tk.25,000
Labor 15,000 Units Introduced Tk.2,00,000 Units
Overhead 45,000 Material Tk.1,00,000
Materials introduced in Process ‘A’ (38,000 units) 14,80,000 Wages Tk. 75,000
Direct Labor 3,59,000 Overheads Tk.70,000 During the period
10,77,000 1,50,000 units were completed and transferred to Process- II. Closing stock 1,00,000
Units scrapped - 2000 Units units. Degree of completion:

Degree of Completion Material 100% Material 100 %

Labor and Overhead 80% Labor 50 %

Closing work-in-progress: 2,000 units Overheads 40 %

Problem 7: XYZ Ltd. manufactures a single product that passes through three
Degree of Completion Material 100% consecutive processes. The company uses the average cost method. The following
Labor and Overhead 80% data relate to the operations of process C for the month of February:
Units finished and transferred to Process B 35000 Units; Normal Loss is 5% of Opening Work- in process 1600 units
total output including opening work-in-progress. Scrapped units fetch 20 per unit
Cost of Opening Work- in Process:
You are required to prepare:
Materials from Process B Tk.14500 Labor Tk. 7200 Overhead Tk. 4000
(i) Statement of equivalent production
(ii) Statement of cost Transfer from Process B 7400 units, value Tk.66500
(iii) Statement of distribution cost, and Transfer to Finished Goods 5000 units.
(iv) Process ‘A’ Account, Normal and Abnormal Loss Accounts
Goods finished but not yet transferred 1000 units.
Units lost (abnormal) 1000

(Labor and overhead 50% complete)

Costs incurred during the month:
Labor Tk. 30300 Overhead Tk.18500
Closing Work-in-Process 2000 units
(Labor and overhead 50% complete)
Prepare the statements necessary for the purpose of valuation of work-in-process and
show process C account.
Problem 8. (Equivalent Production Average Costing): During the month of July
2013 in an Industry 2,000 units were introduced into Process I. The cost of the
2,000 units was 11,600. At the end of the month, 1,500 units had been produced and
transferred to Process II; 360 units were still in process; and 140 units had been
scrapped. A normal loss of 5% on input is allowed. It was estimated that the
incomplete units (i.e. the work-in-progress) had reached a stage in production as
follows:
Material 75% completed
Labor 50% completed
Production overhead 50% completed
The total costs incurred were (in addition to the 2,000 units):
Direct materials introduced during the process 3,080
Direct wages 6,880
Production overheads 3,440
Units scrapped realized 2 each
The units scrapped had passed through the process, so were 100% completed as
regards material, labor, and overhead.
Prepare the Process Account and Abnormal Loss Account.

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Problem 9: Opening work-in-process - 1,000 units (60% complete) Cost Tk. 1,100.
Units introduced during the period 10,000 units; Cost Tk. 19,300. Transferred to next
process - 9,000 units.
Closing work-in-process - 800 units (75% complete). Normal loss is estimated at 10% of
total input including units in process at the beginning. Scrap realized @ Tk.1.00 per unit.
Scrapped units are 100% complete.
Compute equivalent production and cost per equivalent unit according to the FIFO and
average cost method.
Also, evaluate the output.
Problem 10: The ABC manufacturing company uses the FIFO method in process
costing. The following figures were obtained from Dept. 2 for the month of January:
Received from Dept.1: 8000 units, value Tk. 46200
Transferred to DEPT. 3: 6500 units
Abnormal wastage: 1000 units
Stages of completion: 100%. Costs added by the Dept. during the month:
Materials--------Tk. 11400
Labor--------------Tk. 38500
Overhead---------Tk. 19250
Opening work in progress: 1000 units, value Tk. 11500, Stage of completion: Materials
80%: Labor and overhead 40%, Closing work-in-progress 1200units. Stage of
completion: Materials 75%; Labor and overhead 50%. You are required to prepare:
i. Statement of equivalent production;
ii. Statement of costs;
iii. Statement of distribution cost; and
iv. Process ‘2’ Account, Normal and Abnormal Loss Accounts