Distribution of Overheads, Normal Loss, Income Statement : Problems

No.	Problems & Solutions [Click Hide/Show to display the solutions below the question]
01.	(a) Neo Pharma processes a product through three distinct stages the product of one process being passed on to the next process and so on to the finished product intact. Details of the cost incurred in each process are given below Process A Rs. Process B Rs. Process C Rs. Raw Materials Direct wages Direct expenses 1,000 500 150 800 600 250 200 700 500 The overhead expenses for the period amounted to Rs. 3,600 and is to be distributed to the processes on the basis of direct wages. There were no stocks in any of the processes either at the beginning or at the close of the period. Assuming the output was 1,000 kilos show the process cost of A, B and C indicating also the cost per kilo of each element of cost and the output in each process. (b) If 10 per cent of the output is lost in storage and giving samples, what should the selling price per unit be to make a gross profit 33 1/3% on the selling price. Solution []
02.	A product which uses 100 tonnes as input per month passes through two processes. The details of cost in Process I for April, 2007 are: Process I Cost per tonne (Rupees) Direct material cost Direct labour cost Overhead ... ... ... 26,100   7,800 13,500 The total loss in Process I is 2% of input, and the scrap is 8% of input with a value of Rs. 12,000 per tonne. The material is transferred to Process II at cost. The process direct labour cost at Process II is Rs. 9,000 per tonne of input. The overhead is 60% of direct labor cost. The scrap at Process II is at 20% of input with a value of Rs. 12,000 per tonne. Draw up a cost sheet to present the manufacturing cost of the product showing clearly the cost of scrap and waste at each stage of manufacture. Solution []

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