Process Costing Examples-Muhammadazeem

Cas 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 - wit 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 no loss in
units, therefore the cost of output is equal to cost of input.
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 loss)
= Rs. 120,000 / 10,000 units
= Rs. 12 per unit.
The normal loss is inherient in nature, and it occur under efficient operating condition and are
unavoidable.
Cost is not assigned to nos. of units lost (Normal).
The cost of material loss (Normal) is transferred to nos. of expected goods output, which
increases the per unit cost of finished goods.
For Input: For Output

Work 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 no value of
normal loss units.
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 loss)
= Rs. 120,000 / 10,000 units

= Rs. 12 per unit.
Abnormal loss Account
Process cost accoun 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 controllable loss.
2 It will be excluded from the process account having a value equal to the value of goods output.
3 It is treated as a periodic cost and written off in the profit statement at the end of accounting year.
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 account
For Output Abnormal loss account Debit

Same entry Process cost account
b) Transferred to Profit and loss account:

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 output units
= [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 accoun 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
3) For Normal Loss - Salvage value:
a) Recording of normal loss with salvage value:
Spoiled goods (Norm 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 a new account of spoi
goods and transferred that salvage value in it. This procedure will be made regularly and when the spoiled goo
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 simulteneously, which will be
transferred 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 output units incl. abnorma
= 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
= 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 accoun 1,000 11 11,000 Cash 1,000

Profit & loss account
1,000 11,000 1,000
Spoiled goods (Normal loss) Account

Process cost accoun 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 loss is transferred to
Goods output.
2 In Process account, there is a Salvage of normal loss because this value will be recovered from sale
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 cost of output
4 Separate Abnormal loss account will be prepared, taking cost value from process and cash value will
be credited. The balance is called Loss on sale of abnormal loss which will be transferred to
Profit and loss account
5 Separate Normal loss (Spoiled goods) account will be prepared in same manner.
ENTRIES
For Input and Output:

Same entries
For transfer of goods to Spoiled goods (Normal Loss) On Sale of spoiled goods:
Cash
Spoiled goods Debit Profit & Loss a/c
Process account Credit Profit & Loss a/c
Spoiled goods
Gain / loss can be happened in sp

For transfer of goods to Abnormal Loss:
On Sale of Abnormal Loss unit
Abnormal loss accouDebit Cash
Process account Credit Profit & Loss a/c
Abnormal Loss
Only loss will be happened in sale

loss units b/c salvage value is less
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 unit).
= 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
Abnormal Gain Account
Profit & loss account 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 value.
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 output units
= 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
P&L account 1,000 11 11,000 Process account 1,000
1,000 11,000 1,000
Normal Loss Account

units 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 (Norm 10,000

b) Sale of normal loss
Cash 5,000
Abnormal gain 5,000
Spoiled goods (Normal loss) 10,000
Scrap value
of spoiled
output/ unit
Rate Cost
10 120,000
120,000
is there is no loss in
Rate Cost
12 120,000
120,000
g normal loss)
condition and are
ods output, which
Credit
se there is no value of
Rate Cost
12.00 108,000
12 12,000
120,000
abnormal loss)
Rate Cost
12 12,000
12,000
mal or controllable loss.

lue of goods output.
d of accounting year.
loss account
Credit
Credit
Rate Cost
11 110,000
5 10,000
120,000
Expected output units
Rate Cost
5 10,000
10,000
t, and open a new account of spoiled
egularly and when the spoiled goods
d simulteneously, which will be
ected output units incl. abnormal lost unit

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
f normal loss is transferred to
l be recovered from sale
equal to cost of output
ocess and cash value will

e transferred to
On Sale of spoiled goods:
Debit
Profit & Loss a/c (Loss) Debit
Profit & Loss a/c (Gain) Credit
Spoiled goods Credit
Gain / loss can be happened in spoiled goods
On Sale of Abnormal Loss unit

Debit
Profit & Loss a/c (Loss) Debit
Abnormal Loss Credit
Only loss will be happened in sale of abnormal

oss units b/c salvage value is less cost value
mal loss unit).
Rate Cost
12 132,000
-
132,000
Rate Cost
12,000
12,000
salvage value.
Expected output units
Rate Cost
11 121,000
5 10,000
131,000
Cost
11 11,000
11,000
Cost
5 5,000
5,000
10,000
Cost
11 11,000
11,000
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

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
Cost incured in Process B
Material 108,000 9,000 12

Conversion 171,000 9,500 18
549,000 57
Rate Cost
27 270,000
84,000
354,000
270,000
Rate Cost
57 513,000
36,000
549,000
513,000
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:

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
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

Material Conversion
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

Total material 72,000 12,000 6.00
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
Rate Cost
24.90 448,200
86,700
534,900
Rate Cost
51.60 619,200
290,400
909,600
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

Material Conversion
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
FROM BEGINNING INVENTORY - 6,000 units
b) From Current Production (12,000 units)

Cost incurred (12,000 units x 100% x 24.93)
COST OF FINISHED GOODS
Process Y account
Balance b/f 2,000 142,200
Transferred in 18,000 24.89 448,107 Output 12,000
Cost incurred:
Material 60,000
20,000 909,507 20,000

Material Conversion

Less: Work in Process (at start) (2,000) (2,000)
Units started and completed during the period 10,000 10,000
Add: Work in process (at start) - work this period - 400
Add: Work in process (at end) - work this period - 4,000
EPU 10,000 14,400

Cost Units Rate
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 7,200
Total 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
Rate Cost
24.931 448,107
86,793
534,900
148,932
299,160
448,107
Rate Cost
53.20 638,387
271,120
909,507
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 end
Material 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

Material cost (300 units x 100% x 5) 1,500
Conversion cost (300 units x 50% x 4) 600

From Current Production (600 units)
Cost incurred (600 units x 100% x 9)
Add: Cost of normal loss (100 units x 9)
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 Conversion
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

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 as a
loss and the expected good output become 900 units. Therefore the cost of normal loss which is 712.50 is transfer
to 900 units. At the end of month out of 900 expected good output is converted in to 600 finished good and
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
Add: Share of normal loss 475
6,025
Cost of Ending WIP:

Conversion cost (300 units x 50% x 4.25) 638
Process account
Balance b/f - -

Material 5,000
1,000 8,400 1,000

Rate Cost
10.50 6,300
2,100
8,400
5,400
900
6,300
Rate Cost
10.09 6,054
2,349
8,403
6,054
6,054
re declared as a
which is 712.50 is transfer
finished good and
Rate Cost
10.04 6,025
2,375
8,400
Solution of 5 A -2
WIP (at start) Nil

Units put into process 1,000
units completed 600
WIP (at end) - 20% completed 250
Normal 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
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) - as per Exampl
When the amount of normal loss is significant, then the cost is transferred to expected good output(Finished + Ab
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 15 750 P & L 50
50 15 750 50

Material Conversion
Add: Abnormal loss 50 50

EPU 1,000 800

Cost Units Rate


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

CASE I
Input 1000 units are processed upto 50% which is the inspection point. At this level 100 are declared as a
loss and the expected good output become 900 units. Therefore the cost of normal loss which is 712.50 is transfer
to 900 units. At the end of month out of 900 expected good output is converted in to 600 finished good and
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:

Conversion cost (300 units x 50% x 4.25) 638
Process account
Balance b/f - -

Material 5,000
1,000 8,400 1,000

Rate Cost
15.17 9,100
- -
13.00 650
2,250
12,000
Rate Cost
13 650
13 650
7,800
1,300
9,100
Output) - as per Example 5.1
ood output(Finished + Abnormal)
Rate Cost
15.00 9,000
- -
15.00 750
2,250
12,000
Rate Cost
15 750
15 750
7,800
1,200
9,000
re declared as a
which is 712.50 is transfer
finished good and
Rate Cost
10.04 6,025
2,375
8,400
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.
Normal Loss (5,300 rolls x 10%) 530 rolls
Abnormal loss (550 rolls - 530 rolls) 20 rolls.
Material Conversion
Total 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 + 16170 FOH (4620
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
Total cost incurred to complete 100% -1,000 Units
ii) From Current Production (4,300 units):

(4,300 units x 100% x 21.5102)
COST OF GOOD OUTPUT -5,300 UNITS
b) Cost of Re-worked units (500 units)
Material (500 units x 60% x 12.4499)

Labor (500 units x 50% x 2.0134)
FOH (500 units x 50% x 7.0469)
COST OF RE-WORKED
c) Cost of Losses:
i) Cost of Normal Loss:

(530 units x 100% x 21.5102)
ii) Cost of Abnormal Loss:

(20 units x 100% x 21.5102)
d) Cost of Work in Process (at end)
Material (800 units x 80% x 12.4499) 7,967.936

Labor (800 units x 40% x 2.0134) 644.288
FOH (800 units x 40% x 7.0469) 2,255.008
10,867
Process Account
Units Cost Units Cost
Bal b/d 1,000 32,790 Good Output 5,300 128,908
Reworked 500 Reworked 500 6,000
Started 5,650 Normal Loss 530 11,400
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

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

4620 DL + 16170 FOH (4620 x 3.5)
32,790
3,624.12
36,414
92,494
128,908
3,737.97
503.35
1,761.72
6,000.0
11,400
430
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

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)

B
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
B
Units Rate Cost
9,000 13.55 121,950
450
550 11 6,050
2,000 19,600
12,000 147,600
count
Units Rate Cost
550 11 6,050
550 6,050
Conversion
9,000
1,400
450
550
11,400
Rate
7.00
2.00
4.00
13.00
117,000
D GOODS 117,000
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

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
Cost Units
Units received from previous dept 41,500 50,000
Cost incured on Work in process (at start) 1,600 2,000
TOTAL 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)
Units Rate Cost
50,000
5,000 9.13 45,650
1,000 -
8,000 4,160
64,000 49,810
Conversion
50,000
5,000
4,000
59,000
Rate
0.21
0.29
0.33
0.83
41,500
4,150
45,650
at the start
Units Rate Cost
45,000 1.10 49,500
2,000
5,000 4,710
52,000 54,210
1,570
Conversion
45,000
1,000
46,000
Rate
0.83
0.07
0.10
0.11
1.10
49,500

Process Costing Examples-Muhammadazeem

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Cas Particular Input Output Normal Abnormal Abnormal

Loss Loss gain

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 - wit 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

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

12,000 120,000 12,000

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

Normal loss 2,000

12,000 120,000 12,000

For Input: For Output

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

Normal loss 2,000

Abnormal Loss 1,000

12,000 120,000 12,000

= Rs. 120,000 / 10,000 units

1,000 12,000 1,000

For Input For Abnormal Loss:

For Output Abnormal loss account Debit

b) Transferred to Profit and loss account:

For normal loss:

Process Cost Account

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

Normal loss 2,000

12,000 120,000 12,000

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

Spoiled goods (Normal loss) Account

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

2,000 10,000 2,000

Spoiled goods (Norm 10,000

b) Sale of normal loss

Required no.5: Abnormal loss with Salvage value

a) Calculate the salvage value of normal loss

b) Calculate cost per unit

c) Cost of Abnormal loss

Process Cost Account

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

Normal loss 2,000

Abnormal loss 1,000

Abnormal loss Account

Process cost accoun 1,000 11 11,000 Cash 1,000

1,000 11,000 1,000

Spoiled goods (Normal loss) Account

Process cost accoun 2,000 10,000 Cash 2,000

2,000 10,000 2,000

For Input and Output:

Gain / loss can be happened in sp

Only loss will be happened in sale

Required no.6: Abnormal Gain with NO Salvage value

b) Calculate the cost of abnormal gain unit:

c) Prepare Process cost account:

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

1,000 12,000 1,000

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

Abnormal gain 12,000

Required no.7: Abnormal Gain with Salvage value

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