F.Y.

BBA – Semester II – Cost Accounting [Academic Year 2024-25]

Module VI: Process Costing

Example 1: (Abnormal loss / Abnormal Gain)
A product passes through two processes. The output of Process I becomes the input of 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 Rs. 10 per kg. The cost and output data for the month under review are as under:
Particulars Process I Process II
Direct materials Rs. 60,000 Rs. 40,000
Direct labour Rs. 40,000 Rs. 30,000
Production overhead Rs. 39,000 Rs. 40,250
Normal loss 8% 5%
Output in units 18,000 17,400
Realizable Scrap Value 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:
a) Prepare process account and other loss and gain accounts
b) Determine the selling price per unit of the end product
Example 2: (Do it yourself) (Abnormal loss / Abnormal Gain)
Product B is obtained after is passes through three distinct processes. The following information is
obtained from the accounts for the week ending 31 st October 2015:
Items Total (Rs.) Process
I II III
Direct materials 7,542 2,600 1,980 2,962
Direct wages 9,000 2,000 3,000 4,000
1,000 units at Rs. 3 each were introduced to Process I. There was no stock of raw material or work in
progress at the beginning or at the end of the period. The output of each process passes direct to the next
process and finally to finished stock. Production overhead is recovered on 100% of direct wages. The
following additional data are obtained:
Process Output during Percentage of normal Value of scrap
the week (units) loss to input per unit (Rs.)
I 950 5% 2
II 840 10% 4
III 750 15% 5
Prepare process cost accounts and abnormal or loss accounts.
Example 3: (Do it yourself) (Abnormal Gain)
The following particulars for the Process II are given:
Particulars Units Rs.
Transfer from the previous process at cost 4,000 9,000
Transfer to finished stock from the process 3,240 --
Direct Wages -- 2,000
Direct Material used -- 3,000
The factory overhead in process is absorbed @ 400% of the direct materials. Allowance for normal loss
is 20% of units worked. The scrap value is Rs. 5 per unit.
You are required to prepare:
(a) Process II account
(b) Normal Wastage account; and
(c) Abnormal Effectives account.

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F.Y.BBA – Semester II – Cost Accounting [Academic Year 2024-25]
Example 4: (Sale of output from each process, Abnormal loss, Abnormal Gain, Costing P&L A/c)
A product passes through three processes A, B and C. The details of expenses incurred on the three
processes during the year were as under:
Processes A B C
Rs. Rs. Rs.
Sundry materials 10,000 15,000 5,000
Labour 30,000 80,000 65,000
Direct expenses 6,000 18,150 27,200
Selling price per unit of output 120 165 250
10,000 units are introduced in process A @ Rs. 100 per unit. Management expenses during the year were
Rs. 80,000 and selling expenses were Rs. 50,000. These are not allocable to the processes.
Actual output of the three process was: A - 9,300 units, B - 5,400 units and C - 2,100 units. Two thirds of
the output of Process A and one half of the output of Process B was passed on to the next process and
the balance was sold. The entire output of Process C was sold.
The normal loss of the three processes, calculated on the input of every process was Process A – 5%,
B – 15% and C – 20%. The loss of Process A was sold at Rs. 2 per unit, that of B at Rs. 5 per unit and of
Process C at Rs. 10 per unit. Prepare the three Process Accounts and the Profit and Loss account.
Example 5: (Do it yourself) (Profit given as % of selling price, Weight loss with no realisable value, partial
transfer to next process & partial sale)
Marshall and Company produces a patent material used in building, in the manufacture of which three
processes are involved. The materials are produced in three consecutive grades, namely, soft, medium
and hard. Figures relating to production for the first six months of 2010 are as follows:
Particulars Process I Process II Process III
Raw materials used in tons 1,000 -- --
Cost of materials per ton 200 -- --
Manufacturing Wages and Expenses 72,500 40,800 10,710
Loss in Weight (no realizable value) 5% 10% 20%
Normal Scrap (sold @ Rs. 50 per ton) 50 tons 30 tons 51 tons
The product is dealt with as follows:
Transferred to Next Process 66 2/3% 50% -
Transferred to warehouse for sale 33 1/3% 50% 100%
Profit as a percentage of selling price 20% 20% 33 1/3%
You are required to prepare an account for each process, showing the cost per ton of each process. The
company has incurred administrative expenses of Rs.15,000 and Selling Expenses of Rs. 6 per unit for the
6 month period. You are required to prepare Process account and costing profit and loss account for the
6 month period. (F.Y. B. Com (H) – Final Exam – Nov 2018)
Example 6: (Oil making company, Weight loss with no realisable value, Finished Stock A/c)
In a factory, the output passes through three processes to completion i.e. Crushing, Refining and Finishing.
The details are given below for the month of May 2018.
Particulars Crushing (Rs.) Refining (Rs.) Finishing (Rs.)
Wages 15,000 12,000 10,000
Power 6,000 5,000 3,000
Steam 2,000 1,000 500
Other expenses 3,000 2,000 500
Coconut purchased 3,000 kgs costing Rs. 3,00,000. Crude oil produced – 2,500 kg, Refined oil – 1,800 kg
and Finished Oil – 1,760 kg.

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F.Y.BBA – Semester II – Cost Accounting [Academic Year 2024-25]
500 kg crude oil was sold at a cost plus 20% in Crushing Process. Coconut residue 300 kg was sold for Rs.
10,000 and jute sacks were sold for Rs, 1,000. Wastage of 100 kg from the refining process was sold for
Rs. 800. Casks cost Rs. 3,000. Oil stored in casks could be sold for Rs. 200 per kg. Prepare all processes
accounts and Finished Stock account in the books of the company. (F.Y.B.Com (H) Re-exam - Jan 2019)
Example 7: (Do it yourself) (Packing Department A/c)
XY Company mixes powdered ingredients in two different processes to produce one product. The output
of Process 1 becomes the input of Process 2 and the output of Process 2 is transferred to the packing
department. From the information given below, you are required to open accounts for Process 1, Process
2, Abnormal Loss and Packing Department.
Process 1
Input
Material A 6,000 kilograms at 50 paise per kilogram
Material B 4,000 kilograms at Rupee 1 per kilogram
Mixing Labour 430 hours at Rs.2 per hour
Normal loss 5% of weight input, disposed off at 16 paise per kg
Output 9,200 kilograms
Process 2
Inputs
Material C 6,600 kilograms at Rs. 1.25 per kilogram
Material D 4,200 kilograms at Re. 0.75 per kilogram
Flavouring Essence Rs. 300
Mixing Labour 370 hours at Rs. 2 per hour
Normal waste 5% of weight input with no disposal value
Output 19,000 kilograms
Overhead of Rs. 3,200 incurred by the two processes to be absorbed on the basis of mixing labour
hours.
Example 8: (Oil making company, No weight loss)
An oil company gives the following data. You are required to prepare various process accounts. The
company purchased 1000 quintals of coconuts @ Rs. 500 per quintal
Particulars Crushing (Rs.) Refining (Rs.) Finishing (Rs.)
Direct Labour 13,200 6,000 6,000
Power Expenses 2,000 1,000 800
Sundry Materials 1,400 400 -
Repairs to Plant and Machinery 1,000 800 800
Steam 700 360 200
Cost of Casks 1,200
Other information:
1. Other factory overheads are charged @ 75% of Direct Labour in all the processes.
2. Normal Coconut Residue in Crushing Process was 30% of the input and output of Crude Oil was 690
quintals. The realisation value of scrap was Rs. 20 per quintal. Any difference in quantities was
considered to be abnormal
3. In the refining process, there was a normal weight loss of 90 quintals which was sold for Rs. 12,400.
There were no abnormal gains or losses in the process
4. The actual output of the Finishing Process was estimated at 95% after normal loss. The actual output
obtained was 580 quintals. No scrap value can be recovered from any losses in this process
5. The Finished oil was sold at a profit of 20% on cost and the full amount was realised.
Prepare all the process accounts and show the Cost per quintal in each process.

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F.Y.BBA – Semester II – Cost Accounting [Academic Year 2024-25]
“People do not lack strength; they lack will.”
Example 9: (Do it yourself) (Weight loss with no realisable value)
Bangalore Products Ltd. Manufactures a chemical in three processes. The details of these three processes
are as follows:
Particulars Process I Process II Process III
Transfer to next process 66 2/ 3% 60% --
Transfer to warehouse for sales 33 1/3% 40% 100%
In each process out of the total weight put in, 4% is wasted and 6% is scrap. The scrap is sold at Rs.6,
Rs. 10 and Rs.12 per tonne in I, II and III processes respectively. For the month of October, the details of
expenditure are:
Process I 2800 tonnes of materials at Rs. 40/tonne
Process II 320 tonnes of materials at Rs. 64/tonne
Process III 2520 tonnes of materials at Rs. 28/tonne
Production labour cost is: Process I Rs. 20,608; Process II Rs. 12,560; Process III 11,580.
For the month of October, the office and administration expenses worked out at Rs. 15,567 which is to
be charged equally for all the processes.
Prepare Process Cost Accounts. Calculate the cost per tonne in each process.
Equivalent Production (Work in Progress) – FIFO Method
Example 10: (Simple question on FIFO method)
In a process costing system, the following details relate to the month of January 2014.
Particulars
Opening Stock (valued at Rs. 2,325) 1,500 units
Degree of completion :
Materials 80%
Labour 60%
Overheads 60%
Transfer from previous process (@ Rs. 12,080) 12,500 units
Transfer to the next process 12,000 units
Materials added in the process Rs. Nil
Labour added in the process Rs. 6,030
Overheads added in the process Rs. 9,045
Normal Units scrapped 800 units
Value realized from scrap Rs. 200
Closing stock 1,200 units
Degree of completion
Materials 90%
Labour 80%
Overheads 80%
You are required to prepare statement of equivalent production, Statement of cost per unit, Statement
of evaluation and process account.
Example 11: (Do it yourself) (Abnormal loss, Scrappage % is given)
The following data are available in respect of Process I for February 2015.
1) Opening stock of WIP: 800 units at a total cost of Rs. 4,000.
2) Degree of completion of opening WIP :
Materials – 100%
Labour – 60%
Overheads – 60%

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F.Y.BBA – Semester II – Cost Accounting [Academic Year 2024-25]
3) Input of materials at a total cost Rs. 36,800 for 9,200 units
4) Direct wages incurred Rs. 16,740
5) Production overhead Rs. 8,370
6) Units scrapped 1200 units. The stage of completion of these units are :
Materials – 100%
Labour – 80%
Overheads – 80%
7) Closing WIP: 900 units. The stage of completion of these units are :
Materials – 100%
Labour – 70%
Overheads – 70%
8) 7,900 units were completed and transferred to next process.
9) Normal loss is 8% of the total input (Opening stock plus units put it)
10) Scrap value is Rs. 4 per unit
You are required to:
a) Compute equivalent production
b) Calculate cost per equivalent unit for each element
c) Calculate cost of abnormal loss (or gain), closing WIP and the units transferred to the next
process using FIFO method and
d) Prepare Process Account
Example 12: (Abnormal Gain)
The following data pertains to Process 1 for March 2015 of Beta Ltd.:
Opening WIP: 1,500 units @ Rs. 15,000
Degree of Completion:
a) Materials : 100%
b) Labour and Overheads : 33 1/3%
Input of materials:
a) Materials – 18,500 units at Rs. 52,000
b) Direct labour – Rs. 14,000
c) Overheads – Rs. 28,000
Closing WIP: 5,000 units
Degree of Completion:
a) Materials: 90%
b) Labour and Overheads: 30%
Normal Process loss is 10% of total input (Opening WIP + units put in)
Scrap value Rs. 2 per unit
Units transferred to the next process: 15,000 units
You are required to:
i. Compute equivalent units of production
ii. Compute cost per equivalent unit for each cost element i.e. material, labour and overheads
iii. Compute the cost of finished output and closing WIP
iv. Prepare process and other accounts
Example 13: (Abnormal loss, Scrappage % is given)
The following data relates to Process Q:
a) Opening WIP 4,000 units
Degree of completion:
Materials – 100% - Rs. 24,000
Labour – 60% - Rs. 14,400
Overheads – 60% - Rs. 7,200
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F.Y.BBA – Semester II – Cost Accounting [Academic Year 2024-25]
b) Received during the month of April from Process P :
40,000 units – Rs. 1,71,000
c) Expenses incurred in Process Q during the month
Materials – Rs. 79,000
Labour – Rs. 1,38,230
Overheads – Rs. 69,120
d) Closing WIP - 3000 units
Degree of completion:
Materials – 100%
Labour – 50%
Overheads – 50%
e) Units scrapped – 4,000 units, Degree of completion : Material – 100%, Labour and overheads –
80%
f) Normal Loss : 5% of current input
g) Spoiled goods realised Rs. 1.50 each on sale
h) Completed units are transferred to warehouse
Required:
i. Equivalent units statement
ii. Statement of cost per equivalent unit and total costs
iii. Process Q account
iv. Any other account necessary
Equivalent Production (Work in Progress) – Average Stock Method
Example 14: (Simple question on Weighted Average Method, Normal loss as % of total input)
Roy & Johnson (P) Ltd. Gives the following information relating to process A in its plant for the month of
December 2014:
1) Opening WIP on 1.12.14 – 500 units
Material – Rs. 4,800
Labour – R s. 3,200
Overheads – Rs.6,400
Total – Rs. 14,400
2) Units introduced during the month – 19,500 units
3) Processing costs during the month: (In Rs.)
Materials 1,86,200
Labour 72,000
Overheads 1,06,400
Total 3,64,600
4) Output:
Units transferred to Process B – 18200
Units scrapped (completely processed) – 1,400
WIP (Balance) – 400
(degree of completion: Materials -100%, labour and overheads – 50%)
Normal loss in processing is 5% of total input and normal scrapped units fetch Re. 1 each.
Prepare the following for process A for December 2014:
a) Statement of equivalent production
b) Statement of cost
c) Statement of evaluation
d) Process A Account
“The merit of all things lies in their difficulty.”
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F.Y.BBA – Semester II – Cost Accounting [Academic Year 2024-25]
Example 15: (Do it yourself) (Abnormal Gain, Normal loss as % of production units)
The following information is given in respect of Process No. 3 for the month of March 2015:
i. Opening stock – 2,000 units made up of :
Direct material Rs. 25,550; Direct labour Rs. 17,500; Overheads Rs. 11,000
ii. Transferred from Process 2 – 20,000 units @ Rs. 6 per unit
iii. Transferred to Process 4 – 17,000 units
iv. Expenditure incurred in Process 3:
Direct materials Rs. 30,000; direct labour Rs. 60,000; Overheads Rs. 60,000.
v. Scrap 1,000 units – Direct material 100%, Direct labour 60%, overheads 40%
vi. Normal loss 10% of production, scrapped units realised Rs. 4 per unit
vii. Closing stock 4,000 units :
Degree of completion: Direct material 80%; direct labour 60% and overheads 40%.
Prepare statement of equivalent production, statement of cost per unit, statement of evaluation and
Process 3 account.
Example 16: (Abnormal Gain, Normal loss as % of production units)
The following information is available in respect of Process 2 for the month of March:
1) Opening stock – 1,000 units
2) Value of opening stock:
Direct Material – Rs. 6,000; Direct Labour – Rs. 350; and Production Overheads – Rs. 800
3) Transfer from Process 1 – 16,000 units at Rs. 81,000.
4) Transfer to Process 3 – 14,500 units
5) Direct Materials added to Process 2 – Rs. 43,750
6) Direct Labour incurred – Rs. Rs. 14,300
7) Production Overheads absorbed – Rs. 28,500
8) Units scrapped – 500 units (Degree of Completion – Materials 100%, Direct Labour – 60%,
Production Overheads – 20%)
9) Normal loss was estimated at 5% of the production units and realised Rs. 5 per unit
10) Closing Stock – 2,000 units (Degree of Completion - Materials 50%, Direct Labour – 20%, Production
Overheads – 20%)
Prepare the process account and other statements using weighted average cost method.
Example 17: (Do it yourself) (Abnormal Gain, Normal loss as % of production units)
From the following information for the month of October 2012. Prepare Process III Cost Accounts:
Opening WIP in Process III 1,800 units at Rs. 27,000
Transfer from Process II 47,700 units at Rs. 5,36,625
Transferred to warehouse 43,200 units
Closing WIP of Process III 4,500 units
Units scrapped 1,800 units
Direct material added in Process III Rs. 1,77,840
Direct wages Rs. 87,840
Production overheads Rs. 43,920
Degree of completion:
Opening stock Closing stock Scrap
Material 80% 70% 100%
Labour 60% 50% 70%
Overheads 60% 50% 70%
The normal loss in the process was 5% of the production and scrap was sold @ 6.75 per unit.
“Shoot for the moon and if you miss you will still be among the stars.”
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F.Y.BBA – Semester II – Cost Accounting [Academic Year 2024-25]

“A champion is someone who gets up when he can’t.”

Example 18: (Calculation of selling price, Profit as % of sale price)
A company manufactures a product which involves two consecutive processes viz. Pressing and Polishing.
For the month of September, the following information in available:
Particulars Pressing Polishing
Opening stock – –
Input of units in process 1200 1000
Units completed 1000 500
Units under process 200 500
Materials cost Rs. 96,000 Rs. 8,800
Conversion costs Rs. 2,88,000 Rs. 52,000
For incomplete units in process, charge material cost at 100% and conversion costs at 60% in the Pressing
Process and at 50% in the Polishing Process. Prepare a statement of cost and calculate the selling price
per unit which will result in 25% profit in sale price.
“Believe you can and you’re halfway there.”
Example 19: (Do it yourself) (Abnormal loss, Scrappage % is given)
AMS Limited is a peanut oil manufacturing company. Data relating to work done in Crushing Process to
extract the crude oil from raw peanuts during the month of January 2018 is given below:
a) Opening stock of Work in Progress (2,000 kgs. of peanuts)
Materials – Rs, 80,000 (100% complete)
Labour – Rs. 15,000 (80% complete)
Overheads – Rs. 45,000 (80% complete)
b) Raw peanuts introduced in the Crushing Process – 38,000 kilograms @ Rs. 40 per kilogram
c) Direct Labour in Crushing Process – Rs. 3,58,000
d) Overheads incurred in the Crushing process – Rs. 10,74,000
e) Expected Normal loss in the Crushing Process – 5% of total input. This waste can be sold @
Rs.6.70 per kilograms
f) Closing stock of Work in Progress in Crushing Process – 2,500 kilograms
Degree of completion - Materials 100%; Labour and Overheads – 80%
g) Crude oil transferred to the Refining Process – 35,000 kilograms
h) Degree of completion of Units scrapped - Material – 100%, Labour and Overheads – 80%
You are required to make:
1) Statement of Equivalent Production
2) Statement of Cost per Equivalent Unit of Production
3) Statement of Evaluation
4) Crushing Process Account
(F.Y.B.B.A – Final Examination – April 2018)

Chase excellence, Success will follow.

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