PROCESS COSTING

Question 1:
JK Ltd. produces a product “AZE”, which passes through two processes, viz., process I and process II. The output of
each process is treated as the raw material of the next process to which it is transferred and output of the second
process is transferred to finished stock. The following data related to December-
Particulars Process I Process II
25,000 units introduced at a cost of `2,00,000 -
Other material cost `96,020
Direct labour cost `1,92,000
`1,28,000
POH `2,24,000
Normal loss `60,000
Scrape value `1,40,000
10%
Units transferred 10%
`8.60
`9.90
20,000
22,000
Required:
(i)Prepare Process I and Process II account.
(ii) Prepare Abnormal Gain/ Loss account as the case may be for each process.

Question 2:
RST Ltd. Processes product Z through two distinct process- process I and Process II. On completion, it is transferred
to finished stock.
From the following information for the year, prepare ProcessI, Process II and Finished Stock a/c.
Particulars Process I Process II
Raw materials used 7,500 units -
Raw Material Cost per unit `60 -
Transfer to next process/finished stock 7,050 units 6,525 units
Normal loss (on inputs) 5% 10%
Direct Wages `1,35,750 `1,29,250
Direct Expenses 60% of Direct Wages 65% of Direct Wages
Manufacturing Overhead 20% of Direct Wages 15% of Direct Wages
Realisable value of scrap per unit `12.50 `37.50
6,000 units of finished goods were sold at a profit of 15% on cost. Assume that there was no opening or closing stock
of work-in-progress.

Question 3
A product passes through 3 processes A,B and C. 10,000 units at a cost of `1.10 were issued to Process A. The other
direct expenses were as follows.
Particulars Process A Process B Process C
Direct Material ` 1,500 ` 1,500 ` 500
Direct Labour
Direct Expenses ` 4,500 ` 8,000 ` 6,500
` 1,000 ` 1,000 ` 991
The wastage of Process ‘A’ was 5% and that of Process ‘B’ was 4%. The wastage of Process ‘A’ was sold at ` 0.25
per unit and that of ‘B’ at ` 0.50 per unit and that of ‘C’ at ` 1.00 per unit.

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Overheads are charged at 160% of Direct Labour. The final product was sold at ` 10 per unit fetching a profit of 20%
on sales.
Find out the percentage of wastage in Proces C.

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Question 4 –
A product passes through two processes. The output of Process I becomes the input for Process II and the output of
process II is transferred to warehouse. The quantity of raw materials introduced into process I is 20,000 kg. at ` 10 per
kg. The cost and output data for the month under review are as below:

Process I ` Process II
Materials ` 60,000 ` 40,000
Labour ` 40,000 ` 30,000
Production Overheads ` 39,000 ` 40,250
Normal loss 8% 5%
Output 18,000kg 17.400kg
Loss realisation per unit ` 2.00 `3.00
The company's policy is to fix the selling price of the end product in such a way as to yield a profit of 20% on selling
price.
Required to-
1. Prepare the Process Account
2. Determine the selling price per unit of the end product.

Question 5 –
A product passes through 3 processes before it is transferred to finished Stock. The following information is obtained
for the month of December- (information in `)
Items Process I Process II Process III Finished Stock
Opening Stock 10,000 12,000 8,000 30,000
Direct Material 20,000 21,000 30,000 -
Direct Wages 15,000 15,000 16,000 -
Production Overhead 14,000 6,000 40,000 -
Closing Stock 5,000 6,000 4,000 15,000
Profit % on Transfer Price 25% 20% 20% -
Inter–Process Profits for Opening Stock - 2,000 2,000 11,000
Stocks in processes are valued at Prime Cost and the Finished Stock have been valued at the price at which they were
received from Process III. Sales during the period were ` 3,50,000.
From the above information –
1. Prepare Process cost accounts showing the profit element at each stage,
2. Compute actual realised profit
3. Determine the amount of Stock as would appear in the Balance Sheet
4. Show why actual realised profit is different from the profit shown at each stage.

Question 6 –
The following data are available in respect of Process I for the month of October –
Opening WIP 2,250 units at `11,250 Degree of Completion is Material – 100% Labour & OH – 60%

Input of Material 22,750 units at ` 88,500

Direct Material
Production Overhead `20,500
Units Scraped
3,000 units `41,000
Closing WIP
2500 units Degree of completion is Material- 100%, Labour & OH -70%
Degree of completion is Material- 100%, Labour & OH -80%

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Units transferred to the next process 19,500 units

Normal Process Loss is 10% of Total Input (Opening Stock plus units put in). Scrap Value is `3.00 per unit. The
Company follows FIFO method of Inventory Valuation. From the above, you are required to-
1) Prepare Statement of Equivalent Production,
2) Statement of Cost per Equivalent Unit for each element and cost of Abnormal Loss, Closing Work in Progress
and units transferred to next process, and
3) Prepare Process Accounts.

Question 7 –
The following data are available in respect of a manufacturing concern for a particular period-
Opening Work in Progress 1,000 units of `5,000,
Degree of Completion is Materials 100%,Labour 60%,
OH 60%
Inputs of Raw Materials 10,000 units at a cost of `30,000
Direct wages incurred `16,740
Production Overheads `8,370
Units transferred to next process `8,300 units
Units scrapped 1,200 units,
Degree of Completion is Materials 100%,Labour 70%,
OH 70%
Closing Work in Progress 1,500 units,
Degree of Completion is Materials 100%,Labour 40%,
OH 40%

Normal Loss in process is estimated at 10% of the total input. Units scrapped realised `3 per unit. You are required
to:
1) Prepare a Statement of Equivalent Production showing the Cost per Equivalent Unit for each element.
2) Compute the cost of units transferred to the next process, Abnormal Loss and Closing Work in Progress.
3) Prepare Process Accounts

Question 8 –
The following data pertains to Process I of Beta Limited –
Opening Work-in-Progress 1,500units at `15,000,
Degree of Completion is Materials 100%, Labour & OH
33-1/3%
Input of Materials 18,500 units at `52,000
Other Costs Direct Labour `14,000 and Overheads `28,000
Closing Work-in=Progress 5,000 units,
Degree of Completion is Materials 90%, Labour & OH
30%
Normal Process Loss 10% of total input (Opening WIP plus units put in).(Scrap
Value `2p.u)

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Units transferred to next process 15,000 units
Assume- (a) The Company uses FIFO method, (b) Cost of Opening WIP is fully transferred to the next process.

Prepare Process and other accounts from the above information.

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Question 9 –
From the following information for the month ending October, prepare process Cost Accounts fopr Process III. Use
First-in-First-Out(FIFO) Method to Value Equivalent Production.

Direct Materials added in Process III (Opening WIP) 2,000 units at `25,750
(Materials 80%, Labour and OH 60%)
Transfer from Process II 53,000 units at`4,11,500
Transfer to Process IV 48,000 units
Closing Stock of Process III 5,000 units
(Materials 70%, Labour and OH 50%)
Units scrapped 2,000 units
(Materials 100%, Labour and OH 70%)
Direct Material added in Process III `1,97,600
Direct Wages `97,600
Production Overheads `48,000
Normal Loss in the process was 5% of production and scrap was sold at `3 per unit.

Question 10 –
From the following details, prepare the statement of Equivalent Production and Statement of Cost, and find the value
of : (a) Output transferred , and (b) Closing Work in Progress.
1. Opening Work In Progress :2000 units [Cost : materials `7,500 + labour `3,000 + OH`1,500]
2. Units introduced into the process – 8,000 units
3. There are 2,000 units in progress and the stage of their completion is estimated to be- Materials- 100%.
Labour-50%, Overheads-50%
4. 8,000 units are transferred to the next process.
5. Process Costs for the period are Materials -`1,00,000, Labour-`78,000, Overheads-`39,000.

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