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CHAPTERX:PROCESSCOSTING SOLUTIONTOSELFEVALUATIONPROBLEMS SOLUTION1

Process No. 1 Account Period: Dr. Particulars To Direct Material To Direct Labor To Direct Expenses To Production Overhead Total 82.50 33,000.00 82.5 0 33,000.0 0 Cost per unit Rs. 40.00 15.00 5.00 22.50 Amount Rs. Particulars By Process No. 2 Output 400 units Cr. Cost per unit Rs. 82.5 0 Amount Rs.

16,000.00 6,000.00 2,000.00 9,000.00

33,000.0 0

Process No. 2 Account Period:

Output 400 units Dr. Cost per unit Rs. 82.50 1.50 4.00 0.75 6.00 94.75 Cost per unit Rs. 94.7 5 Cr

Particulars To Process No. 1 ireTo LaborMaterial To Direct Labor reTo Direct Expenses To Production Overhead

Amount Rs. 33,000.0 0 600.00 1,600.00 300.00 2,400.00 37,900.0 0

Particulars By Process No. 3

Amount Rs. 37,900.0 0

94.7 5

37,900.0 0

Process No. 3 Account Period: Dr. Particulars Cost per unit Rs. 94.75 4.00 9.00 13.50 121.25 Amount Rs. 37,900.0 0 1,600.00 3,600.00 5,400.00 48,500.0 0 121.25 48,500.0 0 Output 400 units Particulars Cost per unit Rs. 121.25 Cr. Amount Rs. 48,500.0 0

To Process No. 2 eTo Direct Material To Direct Labor To Production Overhead

By Finished Stock a/c

SOLUTION2
Process C Account Period: Output 1,700 units Dr. Particulars To Cost transferred to process To Material To Labor To Overhead Total 2,000 Units 2,000 Amount Rs. 8,000.00 Particulars By Normal Loss Units 200 Cr Amount Rs. 200

8,000.00 normal Loss5 2,100.00 shed Stock a/c 1,000.00 19,100.00

100 1,700 2,000

1,050 17,850 19,100.00

Working Notes:
1. 2.

Normal loss is 10% of input, i.e. 2,000 x 10/100 = 200 units. If there had not been an abnormal loss, output of Process B would have been 1,800 units, i.e. Input Normal loss.
3.

Accumulated cost relating to the process Cost transferred + Material + Labor + Overhead Scrap value relating

to normal loss =
4. 5. 6.

Rs.8,000 + Rs.8,000 + Rs.2,100 + Rs.1,000 Rs.200 = Rs.18,900.

Therefore, cost per unit of normal production should be = Rs.18,900/1,800 units = Rs.10.50. 100 units representing abnormal loss should be valued at Rs.10.50 per unit. 1,700 units representing output of the process should be valued at Rs.10.50 per unit.

SOLUTION3
a.

Raman & Co. Process I Account Period: December 2001


Total Rs. 75,000 By Process II A/c (transfer) 3,00,000 Cost Rs. 2,25,000 Profit Rs. 75,000

Process cost accounts showing the profit at each stage.

Total Rs.

Cost Rs.

Profit Rs.

To Opening stock To Direct Material To Direct Wages Less: Closing Stock c/d To Prime Cost To Production Overhead To Gross Profit (33 cost) % of

80,000 40,000 60,000 1,80,000 20,000 1,60,000 65,000 2,25,000 75,000

80,000 40,000 60,000 1,80,000 20,000 1,60,000 65,000 2,25,000

30,00,000 To Closing Stock b/d 20,000

2,25,000 20,000

75,000

3,00,000

2,25,000

75,000

Notes:1. There is no profit in closing stock of Process I. Raman & Co. Process II Account Period: December 2001
Total Rs. To Opening Stock b/d To Process I Transfer To Direct Material 48,000 3,00,000 85,000 Cost Rs. 40,000 2,25,000 85,000 Profit Rs. 8,000 75,000 By Process III a/c (transfer) Total Rs. 6,25,000 Cost Rs. 4,21,000 Profit Rs. 2,04,000

Total Rs. To Direct Wages Less: Closing Stock To production Overhead 65,000 4,98,000 24,000 4,74,000 26,000 5,00,000 To Gross profit (25% on cost c/d) 1,25,000 6,25,000 To Closing Stock b/d 24,000

Cost Rs. 65,000 4,15,000 20,000 3,95,000 26,000 4,21,000 4,21,000 20,000

Profit Rs. 83,000 4,000 79,000 79,000 1,25,000 2,04,000 4,000

Total Rs.

Cost Rs.

Profit Rs.

6,25,000

4,21,000

2,04,000

2.

Profit relating to Process I has been calculated as follows: Total cost collected x

3.

Profit element in closing stock has been determined as follows: =

Relationship for determining profit element in closing stock should be noted.


4.

= =

Profit relating to Process II has been determined as follows: Total cost collected for transfer to Process III x 25%

Raman & Co. Process III Account Period: December 2001


Total Rs. To Opening Stock To Process II transfer To Direct Material To Direct Wages 8,48,000 Less: Closing Stock c/d 18,000 8,30,000 To Production Overhead To Profit (25% on cost) 1,30,000 9,60,000 2,40,000 12,00,000 To Closing Stock 18,000 6,36,000 13,500 6,22,500 1,30,000 7,52,500 7,52,500 13,500 2,12,000 4,500 2,07,500 2,07,500 2,40,000 4,47,500 4,500 12,00,000 7,52,500 4,47,500 32,000 6,25,000 1,24,000 67,000 Cost Rs. 24,000 4,21,000 1,24,000 67,000 Profit Rs. 8,000 2,04,000 By Finished stock Total Rs. 12,00,000 Cost Rs. 7,52,500 Profit Rs. 4,47,500

Total Rs. b/d

Cost Rs.

Profit Rs.

Total Rs.

Cost Rs.

Profit Rs.

5.

Profit element in closing stock of Process III has been determined as follows: =
6.

= =

Profit relating to Process III has been determined as follows: Total cost collected for transfer to finished stock x 25%

Raman & Co. Finished Stock Account

Total Rs. To Opening Stock To Process III transfer Less: Closing Stock c/d To Profit 1,20,000 12,00,000 13,20,000 60,000 12,60,000 1,40,000 14,00,000 To Closing Stock b/d 60,000

Cost Rs. 76,000 7,52,500 8,28,500 37,659 7,90,841 7,90,841 37,659

Profit Rs. 44,000 4,47,500 4,91,500 22,341 4,69,159 1,40,000 6,09,159 22,341 By Sales

Total Rs. 14,00,000

Cost Rs. 7,90,841

Profit Rs. 4,69,159

14,00,000

7,90,841

4,69,159

a.

Profit relating to closing stock has been determined as follows:

=
b.

Statement showing apparent profit and actually realized profit. Apparent Profit from Process Rs. Unrealized profit in Opening stock Rs. 8,000 8,000 44,000 Less Unrealized Profit in Closing Stock Rs. 4,000 4,500 22,341 Actual profit Rs. 75,000 1,29,000 2,43,500 1,61,659

Process I Process II Process III Finished Stock


c.

75,000 1,25,000 2,40,000 1,40,000

Stock Valuation for Balance Sheet purposes. Closing stock of Rs.20,000

Process I at cost Closing stock of Process II at cost Rs.20,000 (Refer to particulars of closing stock in Process No.II Figure taken from IInd column.) (Refer to particulars of closing stock in Process No.III Figure taken from IInd column.) (Refer to particulars of closing stock in finished stock. Figure taken from IInd column.)

Closing stock of process III at cost

Rs.13,500

Closing stock of finished stock A/c

Rs.37,659

Closing stock to be exhibited in balance sheet

91,159

The result can be cross checked as follows: Total cost incurred in all processes. Process No.1 Material Labor Overhead Process No.2 Material Labor Overhead Process No.3 Material Labor Overhead Add: Cost of opening stock (80,000 + 40,000 + 24,000 + 76,000) Less: Cost of goods sold Closing stock to be exhibited in balance sheet at 1,24,000 67,000 1,30,000 6,62,000 85,000 65,000 26,000 Rs. 40,000 60,000 65,000

2,20,000 8,82,000 7,90,841 91,159

When work done in a process includes unfinished units, equivalent completed units or equivalent production is calculated for work done on unfinished units. Equivalent production represents the production of a process in terms of completed units. The following points have to be considered for preparation of Statement of Equivalent Production.

An estimate is made of the percentage of completion of work-in-progress. Work-in-progress should be stated in equivalent completed units by applying the percentage of work required to complete the unfinished work of the previous period. For example, if the opening work-in-progress is 100 units which is 75% tight lines completed, implies that 75% of the work is completed in the opening work-in-progress units and 25% of the job is to be done. Hence, the equivalent units of these completed units of 100 will be 100 x 25% = 25 units. Unfinished units representing opening stock do not bear the cost transferred to the process with newly introduced units. To obviate this difficulty, units completed in the process are divided in two categories: Unfinished units representing opening stock do not bear the cost transferred to the process with newly introduced units. These units do bear the proportionate material cost relating to the process. For this reason, two columns Material I and Material II are used in the statement of equivalent production. Column Material I represents the units which will bear the cost transferred to the process. The units representing opening stock and partly finished will not appear in this column since they are complete so far as the cost transferred to the process is concerned. Units, which are newly transferred to the process, bear both the cost transferred to the process as well as material cost relating to the process. These units will appear in both the columns (Material I and Material II). Thus, column Material II in statement of equivalent production will include: (i) units equal to work done on opening stock, (ii) units introduced and completed and (iii) units equal to work done on closing stock. Equivalent completed units are not calculated for normal loss because it is shared by good production in the process. Units representing abnormal loss and abnormal gain should be treated like units finished and transferred to next process for the preparation of statement of equivalent production. ii. Cost of work done for completing the opening stock (Refer to statement of apportionment of cost) Cost of units completed and transferred to finished stock 2,400

a.

b.

iii. Cost for completing newly introduced units

14,400 20,000