[A21Q4]

Q.4 Green Limited (GL) produces a chemical that passes through two processes before being transferred
to warehouse. Following information pertains to Process II for the month of
August 2021:

Production Cost
(kg) (Rs. in '000)
Opening work in process 7,500 3,000
Transferred from Process I 45,000 27,000
Material added in Process II 22,500 11,250
Conversion costs incurred in Process II - 1,500
Finished goods transferred to warehouse 60,000 -
Closing work in process 9,000 -

In Process II, material is added at start of the process and conversion costs are incurred
evenly throughout the process. Process loss is determined on inspection which is carried
out on 60% completion of the process. Process loss is estimated at 10% of the inspected
quantity and is sold for Rs. 200 per kg.

The details of opening and closing work in processes are as follows:

Opening work in process Closing work in process

kg Completion % kg Completion %
5,250 80% 5,400 70%
2,250 40% 3,600 30%

GL uses FIFO method for inventory valuation.

Required:
Prepare Process II account for the month of August 2021. (10)
Q-4 Aut-21 [SOLUTION]
Process II Account
Units Rs. 000 Units Rs. 000
b/d 7,500 3,000 Transfer out 60,000 36,228
Transfer in 45,000 27,000 Normal loss [6,615 x 200] 6,615 1,323
Material 22,500 11,250 c/d 9,000 5,581
Conversion - 1,500
Abnormal gain 615 382
75,615 43,132 75,615 43,132

W-1 Quantity schedule Units

Opening WIP [5,250 + 2,250] 7,500
Transfer in 45,000
New material 22,500
Closing WIP [5,400 + 3,600] (9,000)
Normal Loss [W-1.1] (6,615)
Abnormal gain (bal.) 615
Output 60,000

W-1.1 Normal loss

Transfer in 45,000
New material 22,500
Opening WIP 2,250
Closing WIP (3,600)
Inspected Quantity 66,150
Normal Loss [66,150 x 10%] 6,615

W-2 Equivalent Units ------------ Equivalent Units -----------

Units % Process I New material Conversion
Opening WIP:
- Conversion 5,250 20% - - 1,050
- Conversion 2,250 60% - - 1,350

Started & Finished units 52,500 100% 52,500 52,500 52,500

[60,000 - 7,500]

Closing WIP:
- Process I 9,000 100% 9,000 - -
- New material 9,000 100% - 9,000 -
- Conversion 5,400 70% - - 3,780
- Conversion 3,600 30% - - 1,080

Abnormal gain (W-1):

- Process I 615 100% (615) - -
- New material 615 100% - (615) -
- Conversion 615 60% - - (369)
Total Units 60,885 60,885 59,391
W-3 Cost per unit Process I Material Conversion
-------------------- Rs. ----------------------
Total cost for the period 27,000,000 11,250,000 1,500,000
Normal loss [6,615 x 200] (1,323,000) - -
25,677,000 11,250,000 1,500,000

Equivalent Units 60,885 60,885 59,391

Total
Cost per unit (Rs.) 421.73 184.77 25.26 631.76

W-4 Cost of units

Cost of Finished Goods Rs.
Opening WIP:
b/f balance 3,000,000
Conversion [(1,050 + 1,350) x 25.26 (W-3)] 60,624
3,060,624
Started and finished in the Period:
[52,500 x 631.76 (W-3)] 33,167,400
36,228,024

Closing WIP
Process I [9,000 x 421.73 (W-3)] 3,795,570
New material [9,000 x 184.77 (W-3)] 1,662,930
Conversion [(3,780 + 1,080) x 25.26 (W-3)] 122,764
5,581,264

Abnormal gain
Process I [615 x 421.73 (W-3)] 259,364
New material [615 x 184.77 (W-3)] 113,634
Conversion [369 x 25.26 (W-3)] 9,321
382,318