[A12Q6 - Amended]

Q.6 Fowl Limited (FL) manufactures two joint products X and Y from a single production process. Raw
material Benz is added at the beginning of the process. Inspection is performed when the units are
50% complete. Expected loss from rejection is estimated at 10% of the tested units. Following details
are available for the month of May 2012:

Units Material Conversion cost

(Rs.) (Rs.)
Opening work in process 15,000 90,000 25,000
Transferred to finished goods:
− Product- X 50,000
- -
− Product- Y 25,000
Cost incurred in May 2012 - 547,125 228,875
Loss due to rejection 12,500 - -
Closing work in process 10,000 - -

Additional information:
(i) Opening and closing work in process are 75% complete.
(ii) The normal loss is sold as scrap at the rate of Rs. 1.50 per unit.
(iii) Production costs are allocated to joint products on the basis of weight of output.
(iv) The company uses weighted average method for inventory valuation.

Required:
Cost of production report for the month of May 2012. (15 marks)
Fowl Limited [Q-6 Aut-12]
Work in Process account
Units Rs. Units Rs.
b/d [90 + 25] 15,000 115,000 Transfer out:
Material (W-1) 82,500 547,125 -X 50,000 500,000
Conversion - 228,875 -Y 25,000 250,000
NL [82,500 x 10%] 8,250 12,375
AL [12,500 - 8,250] 4,250 36,125
c/d 10,000 92,500
97,500 891,000 97,500 891,000

W-1 Units
Opening WIP 15,000
Input (balancing) 82,500
Closing WIP (10,000)
Actual loss (12,500)
Output 75,000

W-2
W-2.1 Equivalent production -------- Eq. units --------
Units % Material Conversion
Transferred units 75,000 100% 75,000 75,000
Abnormal loss: 4,250
Material 100% 4,250 -
Conversion 50% - 2,125
Closing WIP: 10,000
Material 100% 10,000 -
Conversion 75% - 7,500
[A] 89,250 84,625

W-2.2 Cost per unit ------------ Rs. ------------

Material Conversion
Opening WIP 90,000 25,000
Current period cost 547,125 228,875
Scrap value of NL [8,250 x 1.50] (12,375) -
[B] 624,750 253,875
Per unit cost [B / A] 7.00 3.00

W-2.3 Statement of evaluation Rs.

Cost of completed units [75,000 x (7 + 3)] 750,000
Allocated:
- X [750,000 x 50/75] 500,000
- Y [750,000 x 25/75] 250,000
Cost of AL:
Material [4,250 x 7] 29,750
Conversion [2,125 x 3] 6,375
36,125

Cost of closing WIP:

Material [10,000 x 7] 70,000
Conversion [7,500 x 3] 22,500
92,500