process costing examples-muhammadazeem

8/14/2019 Process Costing Examples-muhammadazeem

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Ca Particular Input Output Normal Abnormal Abnormal

Loss Loss gain

Ltrs Ltrs Ltrs Ltrs Ltrs

1 No losses 12,000 12,000 - - -

2 Normal loss- no S.V 12,000 10,000 2,000 (1/6) - -

3 Abnormal loss - no 12,000 9,000 2,000 (1/6) 1,000 -

4 Normal loss - with S 12,000 10,000 2,000 (1/6) - -

5 Abnormal loss - with 12,000 9,000 2,000 (1/6) 1,000 -

6 Abnormal gain - no 12,000 11,000 2,000 (1/6) - 1,000

7 Abnormal gain - wit 12,000 11,000 2,000 (1/6) - 1,000

Required no.1 When No losses in the process

Process Cost Account

Units Rate Cost Units

Input 12,000 10 120,000 Output 12,000

12,000 120,000 12,000

Cost per unit = Cost of input / Nos. of output units (Expected output units)

= Rs. 120,000 / 12,000 units

= Rs. 10 per unit.

Input cost includes cost of direct material and cost of conversion. In this there is

units, therefore the cost of output is equal to cost of input.


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Required no.2: When Normal loss in the process (With NO salvage value)


Units Rate Cost units

Input 12,000 10 120,000 Output 10,000

Normal loss 2,000

12,000 120,000 12,000

Cost per unit = Cost of input / Nos. of Expected output units (excluding normal lo= Rs. 120,000 / 10,000 units

= Rs. 12 per unit.

The normal loss is inherient in nature, and it occur under efficient operating condition an

unavoidable.

Cost is not assigned to nos. of units lost (Normal).

The cost of material loss (Normal) is transferred to nos. of expected goods outpu

increases the per unit cost of finished goods.

For Input: For OutputWork in process Debit Finished goods Debit

Raw material Credit Work in process

Accured payrol Credit

FOH (Applied) Credit No entry for normal loss because there is

normal loss units.


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Required no.3: When Abnormal loss in the process (With NO salvage value)


units Rate Cost units

Input 12,000 10 120,000 Output 9,000

Normal loss 2,000

Abnormal Loss 1,000

12,000 120,000 12,000

Cost per unit = Cost of input / Nos. of Expected output units (including abnormal

= Rs. 120,000 / 10,000 units

= Rs. 12 per unit.

Abnormal loss Account


Process cost accou 1,000 12 12,000 Profit and loss a/c 1,000

1,000 12,000 1,000

1 These losses are not an inherent in nature and that is why it is called abnormal or contr

2

3 It is treated as a periodic cost and written off in the profit statement at the end of accou

4 Cost of abnormal loss in not included in cost of ending inventory, if any.

For Input For Abnormal Loss:

Same entry a) Transferred from Process account to Abnormal loss accou

For Output Abnormal loss account Debit

Same entry Process cost account

b) Transferred to Profit and loss account:

It will be excluded from the process account having a value equal to the value of goo


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Profit and loss account Debit

Abnormal loss account

For normal loss:

No entry will be made

Required no.4: When Normal loss in the process (With salvage value)



Input 12,000 10 120,000 Output 10,000

Normal loss 2,000

(salvage value)

12,000 120,000 12,000

Cost per unit = (Cost of input - Salvage value of normal loss) / Nos. of Expected o

= [Rs. 120,000 - 10,000 (2,000 units x Rs. 5)] / 10,000 units

= Rs. 11 per unit.

Spoiled goods (Normal loss) Account


Process cost accou 2,000 5 10,000 Cash 2,000

2,000 10,000 2,000

Accounting Entries:

1) For Input: 2) For Output:

Same entry Same entry


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3) For Normal Loss - Salvage value:

a) Recording of normal loss with salvage value:

Spoiled goods (Nor 10,000

Process account 10,000

b) Sale of normal loss

Cash 10,000

Spoiled goods (Normal loss) 10,000

1 The salvage value of normal loss, if any, will reduce the process cost.

2 The salvage value of normal loss will be excluded from process cost account, and open

goods and transferred that salvage value in it. This procedure will be made regularly an

are in large quantity then it will be sold for cash.

In this case there may be gain or loss on sale of spoiled goods if it is not sold simultenetransferred to Profit and loss account.

3 The cost value on normal loss is not assigned because it is transferred to good output.

The Salvage value of normal loss is assigned, which reduces the process cost.

Required no.5: Abnormal loss with Salvage value

a) Calculate the salvage value of normal loss

Salvage value of normal loss = Nos. of units lost x scrape value

2,000 units x Rs. 5

Rs. 10,000

b) Calculate cost per unit

Cost per unit = (Cost of input - Salvage value of normal loss) / Nos. of Expected outp

= Rs. 120,000 - Rs. 10,000 / 10,000 units

= Rs. 11 per unit

c) Cost of Abnormal loss

= units of abnormal loss x cost per unit

= 1,000 units x 11


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= Rs. 11,000



Input 12,000 10 120,000 Output 9,000

Normal loss 2,000

(salvage value)

Abnormal loss 1,000

(cost of abnormal loss)

12,000 120,000 12,000

Abnormal loss Account


Process cost accou 1,000 11 11,000 Cash 1,000

Profit & loss account

1,000 11,000 1,000

Spoiled goods (Normal loss) Account


Process cost accou 2,000 10,000 Cash 2,000

2,000 10,000 2,000

NORMAL LOSS:

1 In Process account, there is no cost value of normal loss because the cost of normal lo

Goods output.

2 In Process account, there is a Salvage of normal loss because this value will be recove

of normal loss which reduces the process cost account.

ABNORMAL LOSS:

3 In Process account, there is a Cost value of abnormal loss is taken, which is equal to c

4 Separate Abnormal loss account will be prepared, taking cost value from process and c

be credited. The balance is called Loss on sale of abnormal loss which will be transferr

Profit and loss account

5 Separate Normal loss (Spoiled goods) account will be prepared in same manner.


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ENTRIES

For Input and Output:

Same entries

For transfer of goods to Spoiled goods (Normal Loss) On Sale of

Cash

Spoiled goods Debit Profit & Los

Process account Credit Profit & L

Spoiled

Gain / loss c

For transfer of goods to Abnormal Loss:

On Sale of

Abnormal loss acco Debit Cash

Process account Credit Profit & LosAbnorm

Only loss wil

loss units b/

Required no.6: Abnormal Gain with NO Salvage value

a) Calculate the cost per unit

Cost per unit = Cost of input / Nos. of expected output units (input units - normal loss un

= Rs. 120,000 / 10,000 units

= Rs. 12

b) Calculate the cost of abnormal gain unit:

Cost of abnormal gain units = 1,000 units x Rs. 12

= Rs. 12,000

c) Prepare Process cost account:



Input 12,000 10 120,000 Output 11,000

Abnormal Gain 1,000 12 12,000 Normal loss 2,000

13,000 132,000 13,000


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Abnormal Gain Account


Profit & loss accoun 1,000 12,000 Process account 1,000

1,000 12,000 1,000

1 Cost of abnormal gain is also equal to cost of output.

2 Cost of abnormal gain is transferred to Profit and loss as a gain, if no salvage va

Accounting Entries


Abnormal Gain 12,000

Abnormal gain 12,000

Profit & loss 12,000

Required no.7: Abnormal Gain with Salvage value

a) Salvage value of normal loss:

Salvage value of normal loss = Nos. of normal loss unit x salvage value per unit

= 2,000 units x Rs 5

= Rs 10,000

b) Cost per unit:

Cost per unit = (Cost of input - Salvage value of normal loss) / Nos. of Expected o

= Rs. 120,000 - 10,000 / 10,000 units

= Rs. 110,000 / 10,000 units

= Rs. 11

c) Process Cost Account


Input 12,000 10 120,000 Output 11,000

Abnormal Gain 1,000 11 11,000 Normal loss 2,000

13,000 131,000 13,000

Abnormal Gain Account

units Cost units


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P&L account 1,000 11 11,000 Process account 1,000

1,000 11,000 1,000

Normal Loss Accountunits Cost units

Process Account 2,000 5 10,000 Cash 1,000

P&L Account 1,000

2,000 10,000 2,000

P&L Account

units Cost units

Normal Loss 1,000 5,000 Abnormal Gain 1,000

Net Profit 6,000

1,000 11,000 1,000

Accounting Entries


Abnormal Gain 11,000

Abnormal gain 11,000

Profit & loss 6,000

Spoiled goods 5,000

Spoiled goods (Nor 10,000


b) Sale of normal loss

Cash 5,000

Abnormal gain 5,000

Spoiled goods (Normal loss) 10,000


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Scrap value

of spoiled

output/ unit

-

-

-

5

5

-

5

Rate Cost

10 120,000

120,000

no loss in


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Rate Cost

12 120,000

-

120,000

ss)

d are

t, which

Credit

no value of


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Rate Cost

12.00 108,000

-

12 12,000

120,000

loss)

Rate Cost

12 12,000

12,000

ollable loss.

ting year.

t

Credit

s output.


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Credit

Rate Cost

11 110,000

5 10,000

120,000

utput units

Rate Cost

5 10,000

10,000


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a new account of spoiled

d when the spoiled goods

ously, which will be

t units incl. abnormal lost unit


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Rate Cost

11 99,000

5 10,000

11 11,000

120,000

Rate Cost

5 5,000

6,000

11,000

Rate Cost

10,000

10,000

s is transferred to

ed from sale

ost of output

ash value will

d to


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poiled goods:

Debit

a/c (Loss) Debit

oss a/c (Gain) Credit

oods Credit

an be happened in spoiled goods

bnormal Loss unit

Debit

a/c (Loss) Debitl Loss Credit

ll be happened in sale of abnormal

c salvage value is less cost value

it).

Rate Cost

12 132,000

-

132,000


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Rate Cost

12,000

12,000

lue.

utput units

Rate Cost

11 121,000

5 10,000

131,000

Cost


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11 11,000

11,000

Cost

5 5,000

5,000

10,000

Cost

11 11,000

11,000


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Solution of Example no. 5.2 on Page # 142

Process A account


Input 14,000 Output 10,000

Cost incurred:

Material 210,000

Conversion 144,000 Balance c/d 4,000

14,000 354,000 14,000

FOR PROCESS A:Calculation of cost of work in process at end and cost of output:

2 Cost of Work in Process (at end):

Nos of units in process (at end) 4,000

Stage of completion 50% Conversion

Material cost: (4,000 units x 100% x 15) 60,000

Conversion cost: (4,000 units x 50% x 12) 24,000

COST OF WORK IN PROCESS 84,000

1 Equivalent Production units: 3 Cost of Finished goods:

Material Conversion Cost of finished goods:

(10,000 units x 100% x 27)

Units completed 10,000 10,000

add: WIP (at end) - 50% 4,000 2,000

EPU 14,000 12,000

Cost incurred 210,000 144,000

Per unit cost 15.00 12.00


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Process B account


Units received 10,000 27 270,000 Output 9,000

Cost incurred:

Material 108,000


10,000 549,000 10,000

FOR PROCESS B:

Calculation of cost of work in process at end and cost of output:

3 Cost of Work in Process:

Nos of units in process (at end) 1,000

Stage of completion 50% conversion

Inventory cost (1,000 units x 27) 27,000

Material cost: (1,000 units x 0% x 12) -Conversion cost: (1,000 units x 50% x 18) 9,000

COST OF WORK IN PROCESS 36,000

1 Equivalent Production units: 4 Cost of Finished goods:

Material Conversion Cost of finished goods:

(9,000 units x 100% x 57)

Units completed 9,000 9,000

add: WIP (at end) - 50% - 500

EPU 9,000 9,500

2 Per unit cost:

Cost Units Rate

Cost received from 270,000 10,000 27

Process A


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Cost incured in Process B

Material 108,000 9,000 12

Conversion 171,000 9,500 18

549,000 57


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Rate Cost

27 270,000

84,000

354,000

270,000


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Rate Cost

57 513,000

36,000

549,000

513,000


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Solution of Example 5.3: WEIGHTED AVERAGE METHOD

Process X account


Balance b/f 6,000 117,900


Cost incurred:

Material 192,000


22,000 534,900 22,000

Calculation of Equivalent Production Units:Material Conversion

Units completed and transferred out 18,000 18,000

Add: Units in process (at end) 4,000 3,000

EPU 22,000 21,000

Calculation of per unit cost:

Cost Units Rate

Material cost incurred:On work in process at start 72,000

During current period 192,000 EPU

Total material 264,000 22,000 12.00

Conversion cost incurred:

On work in process at start 45,900


Total Conversion 270,900 21,000 12.90

TOTAL PER UNIT COST 24.90

Cost of Work in Process (at end)

Material cost (4,000 units x 100% x 12) 48,000

Conversion cost (4,000 units x 3/4 x12.90) 38,700

Cost of Work in Process (at end) 86,700


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Cost of Finished goods:

Cost of finished goods (18,000 units x 100% x 24.90) 448,200

Process Y account


Balance b/f 2,000 142,200

Transferred in 18,000 24.90 448,200 Output 12,000

Cost incurred:

Material 60,000


20,000 909,600 20,000

Calculation of Equivalent Production Units:Material Conversion

Units completed and transferred out 12,000 12,000

Add: Units in process (at end) - 4,000

EPU 12,000 16,000


Cost Units Rate

Per unit cost from Process X:

Units received from previous dept 448,200 18,000

Cost incured on Work in process (at start) 91,800 2,000

TOTAL 540,000 20,000 27.00

Material cost incurred:



Total material 72,000 12,000 6.00


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Total Conversion 297,600 16,000 18.60



Inventory cost (8,000 units x 27) 216,000

Material cost (8,000 units x 0% x 6) -

Conversion cost (8,000 units x 1/2 x 18.6) 74,400



Cost of finished goods (12,000 units x 100% x 51.60) 619,200


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Rate Cost

24.90 448,200

86,700

534,900


29/76

Rate Cost

51.60 619,200

290,400

909,600


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Solution of Example 5.3: FIFO

Process X account


Balance b/f 6,000 117,900


Cost incurred:

Material 192,000


22,000 534,900 22,000

Calculation of Equivalent Production Units:

Material ConversionUnits completed and transferred out 18,000 18,000

Less: Work in Process (at start) (6,000) (6,000)

Units started and completed during the period 12,000 12,000

Add: Work in process (at start) - work this period - 2,400

Add: Work in process (at end) - work this period 4,000 3,000

EPU 16,000 17,400


Cost Units Rate

Material cost incurred: 192,000 16,000 12.00

Conversion cost incurred: 225,000 17,400 12.93



Material cost (4,000 units x 100% x 12) 48,000

Conversion cost (4,000 units x 3/4 x12.90) 38,793



a) From beginning inventory (6,000 units)

Cost incured till start upto 60% processed 117,900

add: Further cost incurred to complete 100%:

Material (6,000 units x 0% x 12) -

Conversion (6,000 units x 40% x 12.93) 31,032 31,032


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Cost transferred in 448,107 18,000 24.89


During current period 60,000 10,000 6.00


During current period 259,200 14,400 18.00



Inventory cost (8,000 units x 24.89) 199,120


Conversion cost (8,000 units x 1/2 x 18) 72,000



a) From beginning inventory (2,000 units)

Cost incured till start of the period 142,200

add: Further cost incured to complete 100%:


Conversion cost (2,000 units x 20% x 18) 7,200 7,200Total cost incured on 2,000 units 149,400

b) From current Production (10,000 units)

Cost incurred (10,000 units x 100% x 48.89) 488,900

TOTAL COST OF FINISHED GOODS 638,300


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Rate Cost

24.931 448,107

86,793

534,900


35/76

148,932

299,160

448,107

Rate Cost

53.20 638,387

271,120

909,507


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WIP (at start) Nil

Units put into process 1,000

units completed 600

WIP (at end) - 50% completed 300

units lost (normall) 100

lost at endMaterial cost 5,000

Conversion cost 3,400

Process account


Balance b/f - -

Input 1,000 Output 600

Cost incurred: Normal loss 100

Material 5,000

Conversion 3,400 Balance c/d 300

1,000 8,400 1,000


Material Conversion

Units completed and transferred out 600 600

Add: Work in process (at end) - work this period 300 150

Add: Unit lost 100 100

EPU 1,000 850


Cost Units Rate


Conversion cost incurred: 3,400 850 4.00

TOTAL PER UNIT COST 9.00Cost of Work in Process (at end)

Material cost (300 units x 100% x 5) 1,500

Conversion cost (300 units x 50% x 4) 600




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From Current Production (600 units)

Cost incurred (600 units x 100% x 9)

Add: Cost of normal loss (100 units x 9)

COST OF FINISHED GOODS

Short Cut Approach: - Unit lost (Normal) is NOT taken in EPU:

Process account


Balance b/f - -



Material 5,000


1,000 8,400 1,000


Material ConversionUnits completed and transferred out 600 600


EPU 900 750


Cost Units Rate

Material cost incurred: 5,000 900 5.56




Material cost (300 units x 100% x 5.56) 1,668





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Cost incurred (600 units x 100% x 1.09)


CASE I

Input 1000 units are processed upto 50% which is the inspection point. At this level 100 are declared

loss and the expected good output become 900 units. Therefore the cost of normal loss which is 712

to 900 units. At the end of month out of 900 expected good output is converted in to 600 finished go

300 w.i.p


Material Conversion

Units completed and transferred out 600 600Add: Work in process (at end) - work this period 300 150


EPU 1,000 800


Cost Units Rate




Cost of normal loss:

Cost of material (100 units x 100% x 5) 500

Cost of conversion (100 units 50% x 4.25) 212.50

712.50

Cost of normal loss on good units (per unit)

Cost of normal loss / Expected good output

712.50 0.7917

900

WIP (at end) = 300 units x 0.79 = 237.50

Finished goods =600 units x 0.79 = 475.00

712.50

Calculation of Cost of Finished goods

600 units x 9.25 5,550


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Add: Share of normal loss 475

6,025

Cost of Ending WIP:


Conversion cost (300 units x 50% x 4.25) 638Add: Share of normal loss 238


Process account


Balance b/f - -



Material 5,000


1,000 8,400 1,000


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Rate Cost

10.50 6,300

-

2,100

8,400


42/76

5,400

900

6,300

Rate Cost

10.09 6,054

-

2,349

8,403


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6,054

6,054

as a

.50 is transfer

d and


44/76

Rate Cost

10.04 6,025

-

2,375

8,400


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Solution of 5 A -2

WIP (at start) Nil

Units put into process 1,000

units completed 600

WIP (at end) - 20% completed 250Normal loss 100

Abnormal loss 50

lost at end

Material cost 8,000

Conversion cost 4,000

Process account


Balance b/f - - Output 600

Input 1,000 Normal loss 100

Cost incurred: Abnormal loss 50

Material 8,000


1,000 12,000 1,000



Process account 50 13 650 P & L 50

50 13 650 50


Material Conversion


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Add: Abnormal loss 50 50


EPU 1,000 800


Cost Units Rate











Add: Cost of normal loss (100 units x 13)


Cost of Abnormal Loss:

50 units x 13 650

Allocation of Cost of normal loss to Output and on abnormal loss (Expected good Output) - a

When the amount of normal loss is significant, then the cost is transferred to expected good output(

Process account


Balance b/f - - Output 600


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Input 1,000 Normal loss 100

Cost incurred: Abnormal loss 50

Material 8,000


1,000 12,000 1,000



Process account 50 15 750 P & L 50

50 15 750 50


Material Conversion



Add: Abnormal loss 50 50


EPU 1,000 800


Cost Units Rate





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Cost of normal loss per unit:

Amount of normal loss 1,300 2.00

Expected good output 650

Cost of normal charged to Finished goods (600 units x 2) 1,200

Cost of normal loss charged to abnormal loss (50 units x 2) 100




Add: Cost of normal loss



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CASE I


50/76

Input 1000 units are processed upto 50% which is the inspection point. At this level 100 are declared

loss and the expected good output become 900 units. Therefore the cost of normal loss which is 712

to 900 units. At the end of month out of 900 expected good output is converted in to 600 finished go

300 w.i.p


Material Conversion




EPU 1,000 800


Cost Units Rate




Cost of normal loss:

Cost of material (100 units x 100% x 5) 500

Cost of conversion (100 units 50% x 4.25) 212.50

712.50

Cost of normal loss on good units (per unit)

Cost of normal loss / Expected good output

712.50 0.7917

900

WIP (at end) = 300 units x 0.79 = 237.50

Finished goods =600 units x 0.79 = 475.00

712.50

Calculation of Cost of Finished goods

600 units x 9.25 5,550


6,025

Cost of Ending WIP:


51/76


Conversion cost (300 units x 50% x 4.25) 638



Process account


Balance b/f - -



Material 5,000


1,000 8,400 1,000


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Rate Cost

15.17 9,100

- -

13.00 650

2,250

12,000

Rate Cost

13 650

13 650


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7,800

1,300

9,100

s per Example 5.1

Finished + Abnormal)

Rate Cost

15.00 9,000


54/76

- -

15.00 750

2,250

12,000

Rate Cost

15 750

15 750


55/76

7,800

1,200

9,000


56/76


57/76

as a

.50 is transfer

d and


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Rate Cost

10.04 6,025

-

2,375

8,400


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Pb 5.27 (5th edition) & 5.35 (6th Edition)

1 At specific level material is added whereas conversion is added uniformly.

2 Inspection at the end of process

3 upto 10% of good output is consider to be normal loss.

4 Reworked- 500 rolls

5 Rework cost is charged to Process overhead. (FIFO)

6 Dyeing dept

1000 units ( Rs. 12000 D/M and 4620 direct labor)

all material added and 60% D/L is incured

During the month 5650 rolls were started and 500 rolls are reworked

Reworked cost is 60% material and 50% direct labor

7 Spoiled goods 550 rolls

8 WIP at end 800 rolls 80% material and 40% direct labor

9 Direct material cost incured 72085 and direct labor 11718

10 FOH 3.5 per direct labor cost

11 Actual FOH is 34110 (excluding reworked cost)

Solution

Unit in process (start) 1,000

Add: Unit placed in production 5,650

Total 6,650

Add: Re-work units 500

Total 7,150

Less: WIP (at end) (800)

Less: Spoiled units (550)

Units finished during the period 5,800

Total 5,800 rolls are completed during the year including 500 rolls reworked.

Therefore 5,300 rolls are un-reworked rolls. (i.e 5,800 rolls - 500 rolls). These

rolls are good output and the normal loss is calculated on these rolls.


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Normal Loss (5,300 rolls x 10%) 530 rolls

Abnormal loss (550 rolls - 530 rolls) 20 rolls.

Material ConversionTotal units completed 5,800 5,800

Less: Re-worked units (500) (500)

Less: Units in process (at start) (1,000) (1,000)

Units compeleted and transferred out 4,300 4,300

add: Re-worked units - work this period 300 250

add: units in process (at start) - work this period - 400

add: units in process (at end) - work this period 640 320

TOTAL 5,240 5,270

add: Normal loss - at the end of process 530 530

add: Abnormal loss - at the end of process 20 20

EQUIVALENT PRODUCTION UNITS 5,790 5,820

Cost Units Rate

Material 72,085 5,790 12.4499

Labor 11,718 5,820 2.0134

Factory overhead (350%) 41,013 5,820 7.0469

124,816 21.5102

Req Allocation of Cost to:

a) Cost of good output (Excluding re-work cost) - 5,300 units:

i) From Beginning Inventory (1,000 units): (12000 DM + 4620 DL + 1

Cost incured till start of the period

add: Cost incurred to complete 100%:

Material (1,000 units x 0% x 12.4499) -

Labor (1,000 units x 40% x 2.0134) 805.36

FoH (1,000 units x 40% x 7.0469) 2,818.76


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Process Account

Units Cost Units Cost

Bal b/d 1,000 32,790 Completed units 5,800 146,308

Reworked 500 -

Started 5,650 Normal Loss 530 -

Material 72,085 Abnormal Loss 20 430

Labor 11,718

FOH (Applied) 41,013 Bal c/d 800 10,867

7,150 157,606 7,150 157,605


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64/76

6170 FOH (4620 x 3.5)

32,790

3,624.12


65/76

36,414

92,494

128,908

3,737.97

503.35

1,761.72

6,000.0

11,400

430


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Solution of Ex- 7 (Chapter 6) M&U

Department B

Units Rate Cost

Unit received 12,000 7.00 84,000 Output

Normal loss

Cost incurred: Abnormal Loss

Material 18,000

Conversion 45,600 Balance c/d

12,000 147,600

Department B

Units Rate Cost

Unit received 12,000 7.00 84,000 Output

Normal loss

Cost incurred: Abnormal Loss

Material 18,000

Conversion 45,600 Balance c/d

12,000 147,600

Abnormal Loss account

Units Rate Cost

Unit received 550 11.00 6,050 P & L / FOH

550 6,050



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Material

Units completed and transferred out 9,000

Add: Work in process (at end) - work this period -

Add: Normal Loss - due to inspection at end -

Add: Abnormal Loss - due to inspection at end -

EPU 9,000


Cost Units

1. Per unit cost from Previous dept 84,000 12,000

Material cost incurred: 18,000 9,000

Conversion cost incurred: 45,600 11,400

TOTAL PER UNIT COST


Inventory Cost (2,000 units x 7) 14,000


Conversion cost (2,000 units x 70% x 4) 5,600



Cost incurred (9,000 units x 100% x 13)



69/76

Units Rate Cost

9,000 13 117,000

450 11 4,950 Cost is assigned b/c inspection at end

550 11 6,050 Cost is assigned b/c inspection at end

2,000 19,600

12,000 147,600

Units Rate Cost

9,000 13.55 121,950

450

550 11 6,050

2,000 19,600

12,000 147,600

Units Rate Cost

550 11 6,050

550 6,050


70/76


71/76

Solution of Pb 7-2

WEIGHTED AVERAGE METHOD

Department A

Units Rate Cost

Balance b/f 3,000 2,647 Output- Transferred out

Input 61,000 - On hand

Cost incurred: Unit lost - Normal loss

Material 12,481

Direct Labor 16,273 Balance c/d

FOH 18,409

64,000 49,810


Material


Units completed but not transferred, on hand 5,000

Add: Units in process (at end) 8,000

EPU 63,000


Cost Units


On work in process at start 749


Total material 13,230 63,000

Direct Labor used



Total Conversion 17,110 59,000





TOTAL PER UNIT COST


72/76


Material cost (8,000 units x 100% x 0.21) 1,680

Direct labor cost (8,000 units x 50% x 0.29) 1,160

FOH (8,000 units x 50% x 0.33) 1,320



1 Units completed and transferred out

(50,000 units x 100% x 0.83)

2 Units completed and on hand

(5,000 units x 100% x 0.83)

Note: Cost of Normal Loss - is added in Finished goods but in this units are lost at the start

of process, therefore at start work done on it in respect of material, labor and FOH

Process Y account

Units Rate Cost

Balance b/f 2,000 2,564

Transferred in 50,000 0.83 41,500 Output

Cost incurred: Unit lost -Normal loss

Material 3,092

Direct labor 4,045

FOH 4,579 Balance c/d

52,000 55,780


Material


Add: Units in process (at end) 5,000

EPU 50,000


73/76


Cost Units


Units received from previous dept 41,500 50,000

Cost incured on Work in process (at start) 1,600 2,000TOTAL 43,100 52,000





Direct labor




FOH incurred




TOTAL PER UNIT COST


Inventory cost (5,000 units x 0.83) 4,150

Material cost (5,000 units x 100% x 0.07) 350

Direct labor cost (5,000 units x 20% x 0.10) 100

FOH Cost (5,000 units x 20% x 0.11) 110



(45,000 units x 100% x 1.10)


74/76


75/76

41,500

4,150

45,650

Units Rate Cost

45,000 1.10 49,500

2,000

5,000 4,710

52,000 54,2101,570

Conversion

45,000

1,000

46,000


76/76

Rate

0.83

0.07

0.10

0.11

1.10

49,500

process costing examples-muhammadazeem

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