[S19Q1]

Q.1 Tulip Enterprises (TE) manufactures a product Alpha that requires two separate processes,
A and B. Following information has been extracted from the cost records of Process B for the
month of February 2019:
Process A Process B cost
Quantity
cost Material Conversion
Liters ------------- Rs. in '000 -------------
Opening work-in-process – Process B 10,000 1,500 600 400
(80% complete as to conversion)
Cost for the month:

- Received from process A 90,000 14,000 - -

- Added during process B 12,000 - 7,000 5,600
Closing work-in-process – Process B 9,500 - - -
(70% complete as to conversion)

Additional information:
(i) Materials are added at start of the process.
(ii) Normal loss is estimated at 5% of the input. Loss is determined at completion of the
process. Loss of each liter results in a solid waste of 0.75 kg. During the month of
February 2019, solid waste produced was 6,000 kg.
(iii) Solid waste is sold for Rs. 170 per kg after incurring further cost of Rs. 20 per kg.
(iv) TE uses weighted average method for valuation of inventory.

Required:
Prepare accounting entries to record the transactions of process B. (Narrations to accounting
entries are not required) (12)
Ans. 1 [Spr-19]
Tulip Enterprises Dr. Cr.
Accounting entries ----- Rs.'000 ----
WIP (B) 14,000.00
WIP (A) 14,000.00
[Units received from Process A]
WIP (B) 12,600.00
RM inventory 7,000.00
Wages control & FOH control 5,600.00
[New material and conversion cost incurred]
Scrap inventory 653.44
Bank [5,125(W-1) x 0.75 x 20] 76.88
WIP (B) (W-3) 576.56
[Normal loss recorded in Process account & further cost incurred]
Abnormal loss [2,875(W-1) x Rs. 268.42 (W-3)] 771.71
WIP (B) 771.71
[Abnormal loss recorded in Process account]
Scrap inventory [2,875 x 0.75 x 170] 366.56
P&L (balancing) 448.27
Bank [2,875 x 0.75 x 20] 43.13
Abnormal loss [2,875 x 268.42(W-3)] 771.71
[Further cost incurred and Charging of abnormal loss]
Cash 1,020.00
Scrap inventory [653.44 + 366.56] 1,020.00
[Sale of solid waste]
Finished goods [94,500 (W-1) x Rs. 268.42 (W-3)] 25,365.69
WIP (B) 25,365.69
[Units completed and transferred out]

Workings
W-1 Quantity schedule Ltrs.
Opening WIP 10,000
Transfer in 90,000
New material 12,000
Closing WIP (9,500)
Inspected units 102,500
Normal loss [102,500 x 5%] (5,125)
Abnormal loss (W-1.1) (2,875)
Output 94,500
W-1.1
Actual loss [6,000kg / 0.75Kg] 8,000
Normal loss (5,125)
Abnormal loss 2,875

W-2 Equivalent production Units (Ltr) SOC Process-A New material Conversion
-------------- Ltrs ---------------
Completed units 94,500 100% 94,500 94,500 94,500
Abnormal loss 2,875 100% 2,875 2,875 2,875
Closing WIP: 9,500
P-A 100% 9,500
New material 100% 9,500
Conversion 70% 6,650
[A] 106,875 106,875 104,025

W-3 Cost per unit Process-A New material Conversion

------------- Rs.'000 -------------
Opening WIP 1,500.00 600.00 400.00
Current period cost 14,000.00 7,000.00 5,600.00
Scrap value of NL [5,125 x 0.75 x (170 - 20)] (576.56) - -
[B] 14,923.44 7,600.00 6,000.00
Cost per unit (Rs.) [B/A] 139.63 71.11 57.68 268.42