Cost Accounting

Lecture-24
Main Ahmad Farhan
 Example
Mini Soap Manufacturing unit providing following information:
Units of opening work in process 200
Units put into the process 800
1000
Units of closing work in process 300
Units completed and transfer out 700

Cost incurred on opening work in process:

Direct Material Rs. 6,000
Direct Labor 2,000
Factory overhead 1,000
9,000

Cost incurred on units put in the process:

Direct Material Rs. 20,000
Direct Labor 10,000
Factory overhead 8,000
38,000
47,000

Units of opening work in process 100% completed as per direct material and 75% completed with direct labor but the
units of closing work in process 100% completed as per material and 50% direct labor.

Required: Prepare cost of production report of process-1

 Cost Of Production Report

Calculation of Equivalent Units Produced

(Weighted Average Method)

Material Labor FOH

Completed 700 700 700

units

Opening WIP 300 (300 x50%) (300 x50%)

150 150
Total 1000 850 850
 Cost Of Production Report

Per unit cost

Per unit cost
(W.Avg)

Material 26,000 / 1000

= 26

Labor 12,000 / 850=

14.1176

FOH 9,000 / 850 =

10.5882
Total 50.7058
 Cost Of Production Report

Cost Apportionment
Cost of units transferred to the next department:
700 x 50.7058 = 35,494

Work in process
Material 300 x 26 = 7,800
Labor 150 x 14.1176 = 2,118
FOH 150 x 10.5882 = 1,588
11,506
47,000
Equivalent production (FIFO)
Opening WIP Completed # Closing work in Total
of units process
(Current (% of
period ) completion)

Material 0 500 300 800

Labor (200 x 25%) 500 (300 x 50%) 700

25 150

FOH (200 x 25%) 500 (300 x 50%) 700

25 150
Cost Per Unit (FIFO)
Direct Material : 20,000 / 800 = 25
Direct Labor : 10,000 / 700 = 14.2857
F.O.H : 8,000 / 700 = 11.4286
50.7143
 Cost Of Production Report
Cost Apportionment (FIFO)
1- Cost of units transferred to next department
a- Opening work in process
Cost already incurred 9,000
Direct Labor 200 x 25% = 50 x 14.2857 = 714
FOH 200 x 25% = 50 x 11.4286 = 571

10,285

b- Cost of completed units

500 x 50.7143 25,358

Cost transferred to next department 35,643

2- Closing work in process

Material 300 x 25 = 7500
Labor 150 x 14.2857 = 2142
FOH 150 x 11.4286 = 1715
11,357
47,000
 Example
Units of opening work in process 2,000
Units produced during the period 16,000
18,000
Units completed and transfer out 14,800
Work in progress at the end 3,200

Stage of Material Labor & Overhead

completion
Opening WIP 100% 50%

Closing WIP 100% 25%

Example
Cost incurred on opening work in process:
Direct Material Rs. 24,000
Direct Labor 3,200
Factory overhead 3,200

30,400
Cost incurred during the current period :
Direct Material Rs. 20,000
Direct Labor 63,680
Factory overhead 63,680
3,19,360

3,49,760
Required: Prepare cost of production report of process-1
 Cost Of Production Report

Calculation of Equivalent Units Produced

(Weighted Average Method)

Material Labor & FOH

Completed 14,800 14,800

units

Opening WIP 3,200 (3,200 x50%)

800
Total 18,000 15,600
Equivalent production (FIFO)
Opening WIP Completed # Closing work in Total
of units process
(Current (% of
period ) completion)

Material 0 12,800 3,200 16,000

Labor & (2000 x 50%) 12,800 (300 x 25%) 14,600

FOH 1000 800
 Cost Of Production Report

Per unit cost Per unit cost

(W.Avg) (FIFO)

Material 2,16,000 / 18,000 19,200 / 16,000 =

= 12 12
Labor 66,880 / 15,600 = 63,680 / 14,600 =
4.2872 4.3616
FOH 66,880 / 15,600 = 63,680 / 14,600 =
4.2872 4.3616

Total 20.5744 20.7232

Cost Of Production Report
Cost Apportionment (Weighed Average Method)

Transfer to next department

14,800 X 20.5744 = 304500
Work in process
Material 3200 x 12 = 38,400
Labor 800 x 4.2872 = 3430
FOH 800 x 4.2872 = 3430
45,260
3,49,760
 Cost Of Production Report
Cost Apportionment (FIFO)
1- Cost of units transferred to next department
a- Opening work in process
Cost already incurred 30,400
Direct Labor 1000 x 4.3616 = 4316
FOH 1000 x 4.3616 = 4316

39,122

b- Cost of completed units

12,800 x 20.7232 2,65,258

Cost transferred to next department 3,04,380

2- Closing work in process

Material 3,200 x 12 = 38,400
Labor 800 x 4.3616 = 3490
FOH 800 x 4.3616 = 3490
45,380
3,49,760