CA Sunil Keswani

109

Process Costing
MAY – 2024 – 8 Marks
Meta Company Ltd. is engaged in the production of product ‘Trio’ which passes through two
different processes Process P and Process Q. Other information obtained from books of account
for the year is as follows:
Particulars Process P Process Q
Raw material used 10,000 -
Raw material cost per unit `80 -
Direct wages `52,000 `78,000
Direct expenses `8,600 `11,100
Selling price per unit of output `130 `190
Production overheads of `3,00,000 are recovered as percentage of direct wages.

Actual output of the two processes was:

P-9,200 units and Q-6,400 units. 3/4thof the output of Process P was passed on to the Process Q
and the balance was sold. The entire output of process Q was sold.

Management & Selling expenses during the year were `1,70,000. These are not allocable to the
processes.

The normal loss of the two processes, calculated on the input of every process was:
Process P- 6% and Process Q-10%

The Loss of Process P was sold at `5 per unit and that of Q at `8 per unit. Assume that Process
P and Process Q are not the responsibility centres.

You are required to prepare:

(i) Process P Account
(ii) Process Q Account
(iii) Abnormal Loss and Abnormal Gain Account
(iv) Costing Profit & Loss Account

Solution
(i) Process P Account
Particulars Units Amount Particulars Units Amount
To Material 10,000 8,00,000 By Normal loss 600 3,000
To Wages 52,000 By Process Q 6,900 7,17,600
(9,200 ´ ¾)
To Direct expenses 8,600 By Costing Profit 2,300 2,39,200
& Loss
(9,200 ´ ¼)

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To Production 1,20,000 By Abnormal loss 200 20,800
Overheads
(3,00,000 ´ 2/5)
10,000 9,80,600 10,000 9,80,600
!,#$,%$$&',$$$
Cost per unit = ($,$$$&%$$
= `104 per unit

(ii) Process Q Account

Particulars Units Amount Particulars Units Amount
To Material 6,900 7,17,600 By Normal loss 690 5,520
To Wages 78,000 By Costing P&L 6,400 10,11,200
To Direct expenses 11,100
To Production 1,80,000
Overheads
(3,00,000 ´ 3/5)
To Abnormal gain 190 30,020
7,090 10,16,720 7,090 10,16,720
!,#%,)$$&*,*+$
Cost per unit = %!$$&%!$
= `158 per unit

(iii) Abnormal Loss Account

Particulars Units Amount Particulars Units Amount
To Process P 200 20,800 By Bank 200 1,000
By Costing P&L 6,400 19,800
200 20,800 200 20,800

Abnormal Gain Account

Particulars Units Amount Particulars Units Amount
To Normal loss 190 1,520 By Process Q 190 30,020
To Costing P&L 28,500
190 30,020 190 30,020

(iv) Costing P&L Account

Particulars Amount Particulars Amount
To Process P 2,39,200 By Sales
To Process Q 10,11,200 P = 2,300 ´ 130 2,99,000
To Abnormal loss 19,800 Q = 6,400 ´ 190 12,16,000
To Selling expenses 1,70,000 By Abnormal gain 28,500
To Net profit 1,03,300
15,43,500 15,43,500

NOV – 2023 – 5 Marks

A product passes through two processes; Process A and Process B. The output of Process A is
treated as input of Process B.
The following information has been furnished:

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Process A Process B
Input material (78,000 kg ´`5) `3,90,000 -
Indirect material - `34,320
Wages `2,85,000 `3,30,000
Overhead `1,67,400 `1,11,600
Output transferred to Process B 68,640 kgs -
Transfer to finished stock - 69,000 kgs
Normal loss of input material (weight in kgs) 7,800 kgs 240 kgs
There is no realizable value for normal loss. No stock of raw materials on work-in-process was left
at the end.
You are required to prepare the Process account for each Process.

Solution
Process A Account
Particulars Units Amount Particulars Units Amount
To Material 78,000 3,90,000 By Normal loss 7,800 -
To Wages 2,85,000 By Abnormal loss 1,560 18,720
To Overheads 1,67,400 By Process B A/c 68.640 8,23,680
78,000 8,42,400 78,000 8,42,400
#,,+,,$$
Cost per unit = )#,$$$&),#$$ = `12 per unit

Process B Account
Particulars Units Amount Particulars Units Amount
To Process A A/c 68,640 8,23,680 By Normal loss 240 -
To Indirect 34,320 By Finished Stock 69,000 13,11,000
material
To Wages 3,30,000
To Overheads 1,11,600
To Abnormal gain 600 11,400
69,240 13,11,000 69,240 13,11,000
(+,!!,%$$
Cost per unit = %#,%,$&+,$ = `19 per unit

NOV – 2022 – 10 Marks

N Ltd. produces a product which passes through two processes Process-I and Process-II. The
company has provided following information related to the Financial Year 2021-22:
Process I Process II
Raw material @`65 per unit 6,500 units -
Direct wages `1,40,000 `1,30,000
Direct Expenses 30% of direct wages 35% of direct wages
Manufacturing Overheads `21,500 `24,500
Realizable value of scrap per `4.00 `16.00
unit
Normal loss 250 units 500 units

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Units transferred to Process 6,000 units 5,500 units
II/ finished stock
Sales - 5,000 units
There was no opening or closing stock of work-in-progress.
You are required to prepare:
(i) Process-I account
(ii) Process-II account
(iii) Finished Stock Account

Solution
Process I A/c
Particulars Units (` ) Particulars Units (` )
To Raw Material used 6,500 4,22,500 By Normal Loss 250 1,000
(250 units ´ `4)
To Direct Wages - 1,40,000 By Process-II A/c 6,000 6,00,000
(`100 ´ 6,000)
To Direct expenses - 42,000 By Abnormal loss 250 25,000
(30% ´ 1,40,000) (`100 ´ 250)
To Manufacturing - 21,500
overheads
6,500 6,26,000 6,500 6,26,000
%,+%,$$$&(,$$$ %,+*,$$$
Cost per unit = %,*$$&+*$
= %,+*$
= `100

Process II A/c
Particulars Units (` ) Particulars Units (` )
To Process-I A/c 6,000 6,00,000 By Normal Loss 500 8,000
(500 units ´ `16)
To Direct Wages - 1,30,000 By Finished Stock A/c 5,500 7,92,000
(`144 ´ 5,500)
To Direct expenses - 45,500
(35% ´ 1,30,000)
To Manufacturing - 24,500
overheads
6,000 8,00,000 6,000 8,00,000
#,$$,$$$&#,$$$ ),!+,$$$
Cost per unit = %,$$$&*$$
= *,*$$
= `144

Finished Stock A/c

Particulars Units (` ) Particulars Units (` )
To Process-II A/c 5,500 7,92,000 By Cost of Sales 5,000 7,20,000
(5,000 units ´ `144)
By Balance c/d 500 72,000
5,500 7,92,000 5,500 7,92,000

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MAY – 2022 – 10 Marks
STG Limited is a manufacturer of chemical ‘GK’, which is required for industrial use. The
complete production operation requires two processes. The raw material first passes through
Process I, where chemical ‘G’ is produced. Following data is furnished for the month of April,
2022:
Particulars (in kgs)
Opening work-in-progress quantity 9,500
(Material 100% and conversion 50% complete)
Material input quantity 1,05,000
Work completed quantity 83,000
Closing work-in-progress quantity 16,500
(Material 100% and conversion 60% complete)
You are further provided that:
Particulars (in `)
Opening work-in-progress cost
Material cost 29,500
Processing cost 14,750
Material input cost 3,34,500
Processing cost 2,53,100
Normal process loss may be estimated at be 10% of material input. It has no realizable value. Any
loss over and above normal loss is considered to be 100% complete in material and processing.

The company transfers 60,000 kgs of output (Chemical G) from Process I to Process II for
producing Chemical ‘GK’. Further materials are added in Process II which yield 1.20 kg. of
chemical ‘GK’ for every kg of chemical ‘G’ introduced. The chemicals transferred to Process II
for further processing are then sold as chemical ‘GK’ for `10 per kg. Any quantity of output
completed in Process I, are sold as chemical ‘G’ @ `9 per kg.

The monthly costs incurred in Process II (other than the cost of chemical ‘G’) are:
Input 60,000 kg of chemical ‘G’
Material Cost `85,000
Processing costs `50,000

You are required:

(i) Prepare statement of Equivalent production and determine the cost per kg of chemical ‘G’ in
Process I using the weighted average cost method.
(ii) Prepare a statement showing cost of Chemical ‘G’ transferred to Process II, cost of abnormal
loss and cost of closing work-in-progress.
(iii) STG is considering the option to sell 60,000 kg of chemical ‘G’ of Process I without
processing it further in Process-II. Will it be beneficial for the company over the current
pattern of processing 60,000 kg in process-II?
(Note: You are not required to prepare Process Account)

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Solution
(i) Statement of Equivalent Production
Material Conversion Cost
Input Output
% Units % Units
Op. WIP 9,500 Op. WIP 9,500 100 9,500 100 9,500
Input 1,05,000 Introd. & Complete 73,500 100 73,500 100 73,500
Transferred 83,000 83,000 83,000
Normal Loss 10,500 - - - -
(1,05,000×10%)
Abnormal Loss 4,500 100 4,500 100 4,500
(Bal. fig)
Closing WIP 16,500 100 16,500 60 9,900
1,14,500 1,14,500 1,04,000 97,400

Statement of Cost per Equivalent Unit

Conversion
Particulars Material Cost
Current Cost 3,34,500 2,53,100
Add: Cost of Opening WIP 29,500 14,750
Total 3,64,000 2,67,850
Equivalent Units 1,04,000 97,400
Cost per equivalent unit 3.50 2.75
Thus, cost per kg of Chemical G = 3.50 + 2.75 = `6.25

(ii) Statement of cost

Particulars Element of Cost Equivalent units Cost per unit Cost Total Cost
Cost of Chemical G Material 83,000 3.50 2,90,500
transferred Conversion cost 83,000 2.75 2,28,250 5,18,750
Abnormal Loss Material 4,500 3.50 15,750
Conversion cost 4,500 2.75 12,375 28,125
Closing WIP Material 16,500 3.50 57,750
Conversion cost 9,900 2.75 27,225 84,975

(iii) Statement of Evaluation of Offer

Particulars Amount (`)
Sale as chemical GK (60,000 ´ 1.20 ´ 10) 7,20,000
Less: Sale as chemical G (60,000 ´ 9) 5,40,000
Incremental sales revenue 1,80,000
Less: further processing cost (85,000 + 50,000) 1,35,000
Incremental Benefit 45,000

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Since, there is incremental benefit in further processing, thus, it is recommended to continue
Chemical ‘G’ in process II and sell as chemical ‘GK’.

DEC – 2021 – 5 Marks

A product passes through Process-I and Process-II.
Particulars pertaining to the Process-I are:
Materials issued to Process-I amounted to `80,000, Wages `60,000 and manufacturing overheads
were `52,500. Normal loss anticipated was 5% of input. 9,650 units of output were produced and
transferred out from Process-I to Process II. Input raw materials issued to Process I was 10,000
units.

There were no opening stocks. Scrap has realizable value of `5 per unit. You are required to
prepare:
(i) Process-I Account
(ii) Abnormal Gain/Loss Account

Solution
(i) Process I Account
Particulars Units Amount Particulars Units Amount
To Material 10,000 80,000 By Normal loss A/c 500 2,500
To Labour - 60,000 By Process -II A/c (bal. 9,650 1,93,000
fig)
To Overheads - 52,500
To Abnormal Gain 150 3,000
10,150 1,95,500 10,150 1,95,500
(,!+,*$$&+,*$$ (,!$,$$$
Normal cost per unit = ($,$$$&*$$
= !,*$$
= `20

(ii) Abnormal Gain Account

Particulars Units Amount Particulars Units Amount
To Normal Loss 150 750 By Process-I A/c 150 3,000
Account
To P&L Account - 2,250
150 3,000 150 3,000

JULY – 2021 – 10 Marks

A Manufacturing unit manufactures a product ‘XYZ’ which passes through three distinct Processes
– X, Y and Z. The following data is given:
Process X Process Y Process Z
Material consumed (in `) 2,600 2,250 2,000
Direct wages (in `) 4,000 3,500 3,000
• The total production overhead of `15,750 was recovered @ 150% of direct wages.
• 15,000 units at `2 each were introduced to process ‘X’.
• The output of each process passes to the next process and finally, 12,000 units were transferred
to Finished Stock Account from Process ‘Z’.

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• No stock of materials or work in progress was left at the end.
The following additional information is given:
Process % of wastage to normal Value of Scrap per unit
output (` )
X 6% 1.10
Y ? 2.00
Z 5% 1.00
You are required to:
(i) Find out the percentage of wastage in process ‘Y’, given that the output of process ‘Y’ is
transferred to Process ‘Z’ at `4 per unit.
(ii) Prepare Process accounts for the three processes X, Y and Z.

Solution
(i) Let normal loss units in process Y = y
-./01 3.4/&56708 901:; .< =.7>01 1.44
Normal cost per unit of Process Y = -./01 :=?/4&@.7>01 1.44 :=?/
*+,%($&+A
4= (,,($$&A

56,400 – 4y = 52,610 – 2y
2y = 3,790
y = 1,895
(,#!*
Thus, Normal loss % of process Y = (,,($$ × 100 = 13.44%

(ii) Process X Account

Particulars Units Amount Particulars Units Amount
To Units Introduced 15,000 30,000 By Normal loss A/c 900 990
To Material - 2,600 (15,000 × 6% × 1.10)
consumed
To Labour - 4,000 By Process Y A/c 14,100 41,610
To Overheads - 6,000
(4,000 × 150%) 15,000 42,600 15,000 42,600
,+,%$$&!!$ ,(,%($
Normal cost per unit = (*,$$$&!$$ = (,,($$ = `2.95106
Process Y Account
Particulars Units Amount Particulars Units Amount
To Process X A/c 14,100 41,610 By Normal loss A/c 1,895 3,790
To Material - 2,250 (Part (i))
consumed
To Labour - 3,500 By Process Z A/c 12,205 48,820
To Overheads - 5,250
(3,500 × 150%) 14,100 52,610 14,100 52,610

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Process Z Account
Particulars Units Amount Particulars Units Amount
To Process Y A/c 12,205 48,820 By Normal loss A/c 610 610
To Material - 2,000 (12,205 × 5% × 1)
consumed
To Labour - 3,000 By Finished Stock A/c 12,000 59,725
To Overheads - 4,500 (12,000 × 4.97715
(3,000 × 150%)
To Abnormal Gain 405 2,015
A/c
(405 × 4.97715) 12,610 60,335 12,610 60,335
*#,'+$&%($ *),)($
Normal cost per unit = (+,+$*&%($ = ((,*!* = `4.97715

JAN – 2021 – 5 Marks

MNO Ltd. has provided following details:
• Opening work in progress is 10,000 units at `50,000 (Material 100%, Labour and overheads
70% complete).
• Input of materials is 55,000 units at `2,20,000. Amount spent on Labour and Overheads is
`26,500 and `61,500 respectively.
• 9,500 units were scrapped; degree of completion for material 100% and for labour &
overheads 60%.
• Closing work in progress is 12,000 units; degree of completion for material 100% and for
labour and overheads 90%.
• Finished units transferred to next process are 43,500 units. Normal loss is 5% of total input
including opening work in progress. Scrapped units would fetch `8.50 per unit.
You are required to prepare using FIFO method:
(i) Statement of Equivalent production
(ii) Abnormal loss account

Solution
(i) Statement of Equivalent Production
Material Conversion cost
Input Output
% Units % Units
Op.
WIP 10,000 Op. WIP 10,000 - - 30 3,000
Introduced &
Input 55,000 Complete 33,500 100 33,500 100 33,500
Transferred 43,500
Normal Loss 3,250 - - - -
(5%×65,000)
Abnormal Loss 6,250 100 6,250 60 3,750

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Closing WIP 12,000 100 12,000 90 10,800
65,000 65,000 51,750 51,050

(ii) Calculation of cost of each element

Particulars Material Conversion Cost
Cost incurred during the month 2,20,000 88,000
Less: Scrap value of normal loss (27,625) -
(3,250×8.50)
Total Cost (A) 1,92,375 88,000
Equivalent Units (B) 51,750 51,050
Cost per equivalent unit (A ÷ B) 3.71739 1.7238
Cost of abnormal loss units = (3.71739 × 6,250) + (1.7238 × 3,750) = `29,698

Abnormal Loss Account

Particulars Amount Particulars Amount
To Process 29,698 By Bank A/c (6,250 × 8.50) 53,125
Account
To Costing P&L 23,427
A/c
53,125 53,125

NOV – 2020 – 10 Marks

Following details are related to the work done in Process-I by ABC Ltd. during the month of May
2019:
(`)
Opening work-in-process (3,000 units)
Materials 1,80,500
Labour 32,400
Overheads 90,000
Material introduced in Process-I (42,000 36,04,000
units)
Labour 4,50,000
Overheads 15,18,000
Units scrapped : 4,800 units
Degree of completion:
Materials : 100%
Labour & Overheads : 70%
Closing work-in-progress : 4,200 units
Degree of completion:
Materials : 100%
Labour & Overheads : 50%

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Units finished and transferred to Process-II: 36,000 units
Normal loss:
4% of total input including opening work-in-process
Scrapped units fetch `62.50 per piece
Prepare:
(i) Statement of equivalent production
(ii) Statement of cost per equivalent unit
(iii) Process-I A/c
(iv) Normal loss account and
(v) Abnormal loss account

Solution
(i) Statement of Equivalent Production
Material Labour Overheads
Input Output
% Units % Units % Units
Op. WIP 3,000 Op. WIP 3,000 100 3,000 100 3,000 100 3,000
Introduced &
Input 42,000 Complete 33,000 100 33,000 100 33,000 100 33,000
Transferred 36,000
Normal Loss 1,800 - - - - - -
(45,000×4%)
Abnormal
Loss 3,000 100 3,000 70 2,100 70 2,100
(4,800 -
1,800)
Closing WIP 4,200 100 4,200 50 2,100 50 2,100
45,000 45,000 43,200 40,200 40,200

(ii) Statement of Cost per Equivalent Unit

Particulars Material Labour Overheads
Current Cost 36,04,000 4,50,000 15,18,000
Add: Cost of Opening WIP 1,80,500 32,400 90,000
Less: Normal Scrap (1,800 × 62.50) (1,12,500) - -
Total 36,72,000 4,82,400 16,08,000
Equivalent Units 43,200 40,200 40,200
Cost per equivalent unit 85 12 40

Statement of apportionment of cost

Element of Equivalent Cost per
Particulars Cost units unit Cost Total Cost
Opening WIP Material 3,000 85 2,55,000

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Labour 3,000 12 36,000
Overheads 3,000 40 1,20,000 4,11,000
Introduced & 28,05,00
Comp. Material 33,000 85 0
Labour 33,000 12 3,96,000
13,20,00
Overheads 33,000 40 0 45,21,000
Abnormal Loss Material 3,000 85 2,55,000
Labour 2,100 12 25,200
Overheads 2,100 40 84,000 3,64,200
Closing WIP Material 4,200 85 3,57,000
Labour 2,100 12 25,200
Overheads 2,100 40 84,000 4,66,200

(iii) Process I Account

Particulars Units Amount Particulars Units Amount
To Opening WIP 3,000 3,02,900 By Normal loss A/c 1,800 1,12,500
To Material 42,000 36,04,000 By Abnormal loss A/c 3,000 3,64,200
To Labour - 4,50,000 By Process -II A/c (bal. 36,000 49,32,000
fig)
To Overheads - 15,18,000 By Closing WIP 4,200 4,66,200
45,000 58,74,900 45,000 58,74,900

(iv) Normal Loss Account

Particulars Units Amount Particulars Units Amount
To Process-I A/c 1,800 1,12,500 By Bank A/c 1,800 1,12,500
1,800 1,12,500 1,800 1,12,500

(v) Abnormal Loss Account

Particulars Units Amount Particulars Units Amount
To Process-I A/c 3,000 3,64,200 By Bank A/c 3,000 1,87,500
(3,000 × 62.50)
By Costing P&L A/c - 1,76,700
(Bal. fig.)
3,000 3,64,200 3,000 3,64,200

NOV – 2019 – 10 Marks

A product passes through two distinct processes before completion. Following information are
available in this respect:
Process-1 Process-2
Raw materials used 10,000 units -
Raw material cost (per unit) `75 -

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Transfer to next process/Finished goods 9,000 units 8,200 units
Normal loss (on inputs) 5% 10%
Direct wages `3,00,000 `5,60,000
Direct expenses 50% of direct wages 65% of direct wages
Manufacturing overheads 25% of direct wages 15% of direct wages
Realizable value of scrap (per unit) `13.50 `145
8,000 units of finished goods were sold at a profit of 15% on cost. There was no opening and
closing stock of work-in-progress.
Prepare:
(i) Process-1 and Process-2 Account
(ii) Finished goods Account
(iii) Normal Loss Account
(iv) Abnormal Loss Account
(v) Abnormal Gain Account

Solution
(i) Process 1 Account
Particulars Units Amount Particulars Units Amount
To Material 10,000 7,50,000 By Normal Loss A/c 500 6,750
To Direct wages - 3,00,000 (500 × 13.50)
To Direct Expenses - 1,50,000 By Abnormal loss A/c 500 66,750
(50% × 3,00,000) (500 × 133.50)
To Manufacturing - 75,000 By Process-2 A/c 9,000 12,01,500
Overheads
(25% × 3,00,000) (9,000 × 133.50)
10,000 12,75,000 10,000 12,75,000
(+,)*,$$$&%,)*$ (+,%#,+*$
Normal cost per unit = ($,$$$&*$$
= !,*$$
= `133.50

Process 2 Account
Particulars Units Amount Particulars Units Amount
To Process -1 A/c 9,000 12,01,500 By Normal Loss A/c 900 1,30,500
To Direct wages - 5,60,000 (900 × 145)
To Direct expenses - 3,64,000 By Finished Goods A/c 8,200 21,04,667
(65% × 5,60,000) (8,200 × 3)
To Manufacturing - 84,000
Overheads
(15% × 5,60,000)
To Abnormal gain A/c 100 25,667
(100 × 3)
9,100 22,35,167 9,100 22,35,167

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++,$!,*$$&(,'$,*$$ +$,)!,$$$
Normal cost per unit = !,$$$&!$$
= #,($$
= `256.6666

(ii) Finished Goods Account

Particulars Units Amount Particulars Units Amount
To Process-2 A/c 8,200 21,04,667 By Sales 8,000 23,61,334
To Costing P&L A/c - 3,08,000 !!",$%,&&'
(!,$$
× 8,000 × 115%)

By Closing St. 200 51,333

8,200 24,12,667 8,200 24,12,667

(iii) Normal Loss Account

Particulars Units Amount Particulars Units Amount
To Process-1 A/c 500 6,750 By Cash A/c 500 6,750
To Process -2 A/c 900 1,30,500 By Cash A/c 800 1,16,000
By Abnormal Gain A/c 100 14,500
1,400 1,37,250 1,400 1,37,250

(iv) Abnormal Loss Account

Particulars Units Amount Particulars Units Amount
To Process-1 A/c 500 66,750 By Cash A/c 500 6,750
By Costing P&L A/c(bal. - 60,000
fig)
500 66,750 500 66,750

(v) Abnormal Gain Account

Particulars Units Amount Particulars Units Amount
To Normal Loss A/c 100 14,500 By Process-2 A/c 100 25,667
To Costing P&L A/c - 11,167
100 25,667 100 25,667

MAY – 2019 – 10 Marks

KT Ltd. produces a product EMM which passes through two processes before it is completed and
transferred to finished stock. The following data relate to May 2019.
Particulars Process A Process B Finished Stock
Opening stock `5,000 `5,500 `10,000
Direct materials 9,000 9,500
Direct wages 5,000 6,000
Factory overheads 4,600 2,030
Closing stock 2,000 2,490 5,000
Inter process profit included in opening stock -- 1,000 4,00
Output of Process A is transferred to Process B at 25% profit on the transfer price and output of
Process B is transferred to finished stock at 20% profit on the transfer price. Stock in process is

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valued at prime cost. Finished stock is valued at the price at which it is received from Process B.
Sales during the period are `75,000.
Prepare the process cost accounts and Finished stock account showing the profit element at each
stage.

Solution
Process A Account
Particulars Cost Profit Total Particulars Cost Profit Total
To Opening 5,000 - 5,000 By Process B A/c 28,800 7,200 21,600
stock
To Direct 9,000 - 9,000
material
To Direct wages 5,000 - 5,000
19,000 - 19,000
(-) Closing stock (2,000) - (2,000)
17,000 - 17,000
To Factory OHs 4,600 - 4,600
21,600 - 21,600
To Profit - 7,200 7,200
21,600 7,200 28,800 21,600 7,200 28,800

Process B Account
Particulars Cost Profit Total Particulars Cost Profit Total
To Opening 4,500 1,000 5,500 By F. Stock 41,550 20,125 61,675
stock A/c
To Process A 21,600 7,200 28,800
A/c
To Direct 9,500 - 9,500
material
To Direct wages 6,000 - 6,000
41,600 8,200 49,800
(-) Closing stock (2,080) (410) (2,490)
39,520 7,790 47,310
To Factory OHs 2,030 - 2,030
41,550 7,790 49,340
To Profit - 12,335 12,335
41,550 20,125 61,675 41,550 20,125 61,675
#,+$$
Profit element in closing stock = ,!,#$$×2,490 = `410

Sunil Keswani PYQs of Cost & Management Accounting

CA Sunil Keswani
124
Finished Stock Account
Particulars Cost Profit Total Particulars Cost Profit Total
To Opening 6,000 4,000 10,000 By Costing P&L 44,233 30,767 75,000
stock A/c
To Process B 41,550 20,125 61,675
A/c
47,550 24,125 71,675
(-) Closing (3,317) (1,683) (5,000)
stock
44,233 22,442 66,675
To Profit (Bal. - 8,325 8,325
fig)
44,233 30,767 75,000 44,233 30,767 75,000
+,,(+*
Profit element in closing stock = )(,%)*×5,000 = `1,683

NOV – 2018 – 5 Marks

Following details have been provided by M/s AR Enterprises:
(i) Opening works-in-progress - 3,000 units (70% complete)
(ii) Units introduced during the year - 17,000 units
(iii) Cost of the process (for the period) - `33,12,720
(iv) Transferred to next process - 15,000 units
(v) Closing works-in-progress - 2,200 units (80% complete)
(vi) Normal loss is estimated at 12% of total input (including units in process in the beginning).
Scraps realize `50 per unit. Scraps are 100% complete.
Using FIFO method, compute:
(i) Equivalent production
(ii) Cost per equivalent unit

Solution
Statement of Equivalent Production
Material
Input Output
% Units
Op. WIP 3,000 Op. WIP 3,000 30 900
Introduced &
Input 17,000 Complete 12,000 100 12,000
Transferred 15,000
Normal Loss 2,400 - -
(20,000×12%)
Abnormal
Loss 400 100 400
(Bal. fig.)

Sunil Keswani PYQs of Cost & Management Accounting

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125
Closing WIP 2,200 80 1,760
20,000 20,000 15,060

Statement of cost per equivalent production unit:

Cost of the Process `33,12,720
Less: Scrap value of normal loss (`50 × 2,400)(`1,20,000)
Total Process Cost `31,92,720
Total equivalent units ___15,060
Cost per equivalent production unit _____`212

MAY – 2018 – 10 Marks

Alpha Ltd. is engaged in the production of a product A which passes through 3 different process –
Process P, Process Q and Process R. The following data related to cost and output is obtained from
the books of accounts for the month of April 2017:
Particulars Process P Process Q Process R
Direct Material 38,000 42,500 42,880
Direct Labour 30,000 40,000 50,000
Production overheads of `90,000 were recovered as percentage of direct labour.

10,000 kg of raw material @ `5 per kg was issued to Process P. There was not stock of materials
or work in process. The entire output of each process passes directly to the next process and finally
to warehouse. There is normal wastage, in processing of 10%. The scrap value of wastage is `1
per kg. The output of each process transferred to next process and finally to warehouse are as
under:
Process P = 9,000 kg
Process Q = 8,200 kg
Process R = 7,300 kg
The company fixes selling price of the end product in such a was so as to yield a profit of 25% on
selling price. Prepare Process P. Q and R Accounts. Also calculate selling price per unit of end
product.

Solution
Process P Account
Particulars Units Amount Particulars Units Amount
To Input 10,000 50,000 By Normal Loss A/c 1,000 1,000
To Direct Material - 38,000 (1,000 × 1)
To Direct Labour - 30,000 By Process Q A/c 9,000 1,39,500
To Production OHs - 22,500 (9,000 × 15.50)
(90,000 × 3/12)
10,000 1,40,500 10,000 1,40,500
(,,$,*$$&(,$$$ (,'!,*$$
Normal cost per unit = ($,$$$&(,$$$
= !,$$$
= `15.50

Sunil Keswani PYQs of Cost & Management Accounting

CA Sunil Keswani
126

Process Q Account
Particulars Units Amount Particulars Units Amount
To Process P A/c 9,000 1,39,500 By Normal Loss A/c 900 900
To Direct Material - 42,500 (900 × 1)
To Direct Labour - 40,000 By Process R A/c 8,200 2,54,200
To Production OHs - 30,000 (8,200 × 31)
(90,000 × 4/12)
To Abnormal gain A/c 100 3,100
(100 × 31)
9,100 2,55,100 9,100 2,55,100
+,*+,$$$&!$$ +,*(,($$
Normal cost per unit = !,$$$&!$$
= #,($$
= `31

Process R Account
Particulars Units Amount Particulars Units Amount
To Process Q A/c 8,200 2,54,200 By Normal Loss A/c 820 820
To Direct Material - 42,880 (820 × 1)
To Direct Labour - 50,000 By Abnormal loss A/c 80 4,160
To Production OHs - 37,500 (80 × 52)
(90,000 × 5/12) By Finished Goods A/c 7,300 3,79,600
(7,300 × 52)
8,200 3,84,580 8,200 3,84,580
',#,,*#$&#+$ ',#',)%$
Normal cost per unit = #,+$$&#+$
= ),'#$
= `52

Calculation of selling price per unit of end product

Cost per unit `52.00
Add: Profit per unit – 25% on selling price i.e. 1/3 of cost `17.33
Selling price per unit `69.33

Sunil Keswani PYQs of Cost & Management Accounting