Process Costing Examples-Vuguide - TK

Collin, Chapter # 5, Example # 5.
1, Page # 156
Case Particular Input Output Normal Abnormal

Loss Loss
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 S.V. 12,000 9,000 2,000 (1/6) 1,000
4 Normal loss - with SV 12,000 10,000 2,000 (1/6) -
5 Abnormal loss - with SV 12,000 9,000 2,000 (1/6) 1,000
6 Abnormal gain - no SV 12,000 11,000 2,000 (1/6) -
7 Abnormal gain - with SV 12,000 11,000 2,000 (1/6) -
Required no.1 When No losses in the process
Process Cost Account

Units Rate Cost
Input 12,000 10 120,000 Output
12,000 120,000
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
Input 12,000 10 120,000 Output
Normal loss
12,000 120,000
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.
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
Raw material Credit Work in process
Accured payrol Credit
FOH (Applied) Credit No entry for normal loss because there is no val
normal loss units.
Required no.3: When Abnormal loss in the process (With NO salvage value)
units Rate Cost
Input 12,000 10 120,000 Output
Normal loss
Abnormal Loss
12,000 120,000
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
Units Rate Cost
Process cost account 1,000 12 12,000 Profit and loss a/c
1,000 12,000
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

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

Abnormal loss account
For normal loss:

No entry will be made
Required no.4: When Normal loss in the process (With salvage value)

Units Rate Cost
Input 12,000 10 120,000 Output
Normal loss
(salvage value)
12,000 120,000
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

Units Rate Cost
Process cost account 2,000 5 10,000 Cash
2,000 10,000
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 (Normal loss) 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 spoiled goods and transferred at
salvage value in it. This procedure will be made regularly and when the
spoiled goods 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 P &L Account.
3 Normal Loss - Cost is NOT assigned but Salvage Value assigned to it.
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) / Expected output units
= 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
Units Rate Cost
Input 12,000 10 120,000 Output
Normal loss
(salvage value)
Abnormal loss
(cost of abnormal loss)
12,000 120,000
Abnormal loss Account

Units Rate Cost
Process cost account 1,000 11 11,000 Cash
Profit & loss account
1,000 11,000
Spoiled goods (Normal loss) Account

Units Rate Cost
Process cost account 2,000 10,000 Cash
2,000 10,000
NORMAL LOSS:
1 Cost is NOT Assigned but the Salvage value is Assigned to it in Process a/c
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 credited. The balance is called
"Loss on sale of abnormal loss" which will be transferred to P& L account.
5 Separate Normal loss (Spoiled goods) account will be prepared

in same manner.
ENTRIES
For Input and Output:

Same entries
1 For transfer of goods to Spoiled goods (Normal Loss)
Spoiled goods Debit

Process account Credit
2 On Sale of spoiled goods:

Cash Debit
Profit & Loss a/c (Loss) Debit
Profit & Loss a/c (Gain) Credit
Spoiled goods Credit
Gain / loss can be happened in spoiled goods
3 For transfer of goods to Abnormal Loss:
Abnormal loss account Debit

Process account Credit
4 On Sale of Abnormal Loss unit

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

loss units b/c salvage value is less cost value
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:

Units Rate Cost
Input 12,000 10 120,000 Output
Abnormal Gain 1,000 12 12,000 Normal loss
13,000 132,000
Abnormal Gain Account

units Cost
Profit & loss account 1,000 12,000 Process account

1,000 12,000
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.
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
Units Rate Cost
Input 12,000 10 120,000 Output
Abnormal Gain 1,000 11 11,000 Normal loss
13,000 131,000
Abnormal Gain Account

Units Rate Cost
Profit & Loss account 1,000 11,000 Process account
1,000 11,000
Normal Loss Account

Units Rate Cost
Process Account 2,000 5 10,000 Cash

Profit & Loss Account
2,000 10,000
Profit & Loss Account

Units Rate Cost
Normal Loss 5,000 Abnormal Gain

Net Profit 6,000
11,000
Accounting Entries
Abnormal Gain 11,000
Abnormal gain 11,000

Profit & loss 11,000
Spoiled Goods 5,000

Profit & Loss 5,000
Normal Loss 10,000
b) Sale of normal loss
Cash 5,000
Spoiled Goods 5,000
Abnormal Scrap value
gain of spoiled
Ltrs output/ unit
- -
- -
- -
- 5
- 5
1,000 -
1,000 5
Units Rate Cost
12,000 10 120,000
12,000 120,000
In this there is no loss in

units Rate Cost
10,000 12 120,000
2,000 -
12,000 120,000
uding normal loss)
ting condition and are
ed goods output, which
Debit
Credit
mal loss because there is no value on
nt
units Rate Cost
9,000 12.00 108,000
2,000 -
1,000 12 12,000
12,000 120,000
ding abnormal loss)
nt
Units Rate Cost
1,000 12 12,000
1,000 12,000
bnormal or controllable loss.

he value of goods output.
he end of accounting year.
o Abnormal loss account
Debit
Credit
Debit
Credit
nt
Units Rate Cost
10,000 11 110,000
2,000 5 10,000
alvage value)
12,000 120,000
. of Expected output units
Account
Units Rate Cost
2,000 5 10,000
2,000 10,000
nt
Units Rate Cost
9,000 11 99,000
2,000 5 10,000
alvage value)
1,000 11 11,000
ost of abnormal loss)
12,000 120,000
nt
Units Rate Cost
1,000 5 5,000
ofit & loss account 6,000
1,000 11,000
Account
Units Rate Cost
2,000 10,000
2,000 10,000
- normal loss unit).
nt
Units Rate Cost
11,000 12 132,000
2,000 -
13,000 132,000
nt
units Cost
1,000 12,000
1,000 12,000
. of Expected output units
nt
Units Rate Cost
11,000 11 121,000
2,000 5 10,000
13,000 131,000
nt
Units Rate Cost
1,000 11,000
1,000 11,000
t
Units Rate Cost
1,000 5 5,000
ofit & Loss Account 5,000
1,000 10,000
t
Units Rate Cost
bnormal Gain 11,000
11,000
Solution of Example no. 5.2 on Page # 164
Process A account
Units Rate Cost
Input 14,000 Output
Cost incurred:
Material 210,000
Conversion 144,000 Balance c/d
14,000 354,000
FOR PROCESS A:
1 Equivalent Production units:
Material Conversion
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
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 (100% material and 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
3 Cost of Finished goods:
Cost of finished goods:

(10,000 units x 100% x 27) 270,000
Process B account
Units Rate Cost
Units received 10,000 27 270,000 Output
Cost incurred:
Material 108,000
10,000 549,000
FOR PROCESS B:
1 Equivalent Production units:
Material Conversion
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
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%
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
4 Cost of Finished goods:
Cost of finished goods:

(9,000 units x 100% x 57) 513,000
Units Rate Cost
10,000 27 270,000
4,000 84,000
14,000 354,000
and 50% conversion)

Units Rate Cost
9,000 57 513,000
1,000 36,000
10,000 549,000
Solution of Example 5.3: on Page # 166
WEIGHTED AVERAGE METHOD
Process X account
Units Rate Cost
Balance b/f 6,000 117,900
Input 16,000 Output
Cost incurred:
Material 192,000
22,000 534,900
Calculation of Equivalent Production Units:

Material
Units completed and transferred out 18,000

Add: Units in process (at end) 4,000
EPU 22,000
Calculation of per unit cost:

Cost Units - EPU
Material:
( 72,000 + 192,000 ) 264,000 22,000
Labour :
( 45,900 + 225,000 ) 270,900 21,000
Total 534,900
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)

Process Y account
Units Rate Cost
Balance b/f 2,000 142,200
Transferred in 18,000 24.90 448,200 Output
Cost incurred:
Material 60,000
20,000 909,600

Material

Add: Units in process (at end) -
EPU 12,000

Cost Units
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
Material cost incurred:

On work in process at start 12,000
During current period 60,000 EPU
Total material 72,000 12,000
Conversion cost incurred:

On work in process at start 38,400
During current period 259,200 EPU
Total Conversion 297,600 16,000
TOTAL PER UNIT COST
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)

t
Units Rate Cost
18,000 24.90 448,200
4,000 86,700
22,000 534,900
Conversion
18,000
3,000
21,000
Rate
12
12.90
24.90
448,200
t
Units Rate Cost
12,000 51.60 619,200
8,000 290,400
20,000 909,600
Conversion
12,000
4,000
16,000
Rate
27.00
6.00
18.60
51.60
619,200
Solution of Example 5.3: on Page # 168
FIFO
Process X account
Units Rate Cost Units
Balance b/f 6,000 117,900
Input 16,000 Output 18,000
Cost incurred:
Material 192,000
Conversion 225,000 Balance c/d 4,000
22,000 534,900 22,000

Material Conversion
Units 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
TOTAL PER UNIT COST 24.93
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 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
Total cost incurred to complete 100% (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
Conversion 259,200 Balance c/d 8,000
20,000 909,507 20,000

Material Conversion
Units completed and transferred out 12,000 12,000

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
Per unit cost from Process X:

Cost transferred in 448,107 18,000 24.89
Material cost incurred:

During current period 60,000 10,000 6.00
Conversion cost incurred:

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%:
Material cost (2,000 units x 0% x 6)
Conversion cost (2,000 units x 20% x 18) 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
24.89 448,107
86,793
534,900
148,932
299,160
448,107
Rate Cost
53.20 638,387
271,120
909,507
onversion
Example # 5A.1, on Page # 175
1 WIP (at start) -

2 Units put into process 1,000
3 units completed 600
4 WIP (at end) - 50% completed 300
5 units lost (normal) lost at end 100
6 Material cost Introduce at start 5,000

7 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)

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
Add: Share of normal loss 237.50
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
00 are declared as a
oss which is 712.50 is transfer
600 finished good and
Rate Cost
10.04 6,025
2,375
8,400
Solution of 5A-2, on Page # 177
WIP (at start) -

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
Add: Unit lost (Normal Loss) 100 100

EPU 1,000 800

Cost Units Rate



Add: Cost of normal loss (100 units x 13)
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 + Abn
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: (100 units x 13= 1,300)
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
are 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) on Page # 194
### At specific level material is added whereas conversion is added uniformly.

### Inspection at the end of process
### upto 10% of good output is consider to be normal loss.
### Reworked- 500 rolls
### Rework cost is charged to Process overhead. (FIFO)
### Dyeing dept
WIP (at start) 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
### Spoiled goods 550 rolls

### WIP at end 800 rolls 80% material and 40% direct labor
### Direct material cost incured 72085 and direct labor 11718
### FOH 3.5 per direct labor cost
### 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% of D.L 41,013 5,820 7.0469
124,816 21.5102
Req #2 :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 x 3
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 ( Normal Loss )
i) Cost of Normal Loss:

(530 units x 100% x 21.5102)
Total Cost of Finish Goods
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
Total Cost of Accounted For
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

20 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
146,308
430
10,867
157,605
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
12,000 147,600

Material
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 13.000 117,000
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
Conversion
9,000
1,400
450
550
11,400
Rate
7.00
2.00
4.00
13.00
117,000
D GOODS 117,000

Process Costing Examples-Vuguide - TK

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Collin, Chapter # 5, Example # 5.

Case Particular Input Output Normal Abnormal

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 S.V. 12,000 9,000 2,000 (1/6) 1,000

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

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

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

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

Required no.1 When No losses in the process

Process Cost Account

Input 12,000 10 120,000 Output

Process Cost Account

Input 12,000 10 120,000 Output

= Rs. 120,000 / 10,000 units

For Input: For Output

Input 12,000 10 120,000 Output

= Rs. 120,000 / 10,000 units

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

For Input For Abnormal Loss:

For Output Abnormal loss account

b) Transferred to Profit and loss account:

Profit and loss account

For normal loss:

Process Cost Account

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

Spoiled goods (Normal loss) Account

Process cost account 2,000 5 10,000 Cash

3) For Normal Loss - Salvage value:

Spoiled goods (Normal loss) 10,000

b) Sale of normal loss

Required no.5: Abnormal loss with Salvage value

b) Calculate cost per unit

c) Cost of Abnormal loss

Input 12,000 10 120,000 Output

Abnormal loss Account

Spoiled goods (Normal loss) Account

Process cost account 2,000 10,000 Cash

4 Separate Abnormal loss account will be prepared, taking cost value

5 Separate Normal loss (Spoiled goods) account will be prepared

For Input and Output:

1 For transfer of goods to Spoiled goods (Normal Loss)

Spoiled goods Debit

2 On Sale of spoiled goods:

3 For transfer of goods to Abnormal Loss:

Abnormal loss account Debit

4 On Sale of Abnormal Loss unit

Only loss will be happened in sale of abnormal

Required no.6: Abnormal Gain with NO Salvage value

a) Calculate the cost per unit

b) Calculate the cost of abnormal gain unit:

c) Prepare Process cost account:

Input 12,000 10 120,000 Output

Abnormal Gain 1,000 12 12,000 Normal loss

Abnormal Gain Account

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

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

Abnormal gain 12,000

Required no.7: Abnormal Gain with Salvage value

a) Salvage value of normal loss:

b) Cost per unit:

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

Input 12,000 10 120,000 Output