Process Accounts - Normal Loss, Abnormal Loss, Abnormal Gain - Income statement

Problem 1

Product 'Z' is obtained after it passes through three distinct processes. The following information is obtained from the accounts for the month ending March 31, 2005:
Items Total Processes
I II III
Direct Materials
Direct Wages
Production Overhead
7,542
9,000
9,000
2,600
2,000
1,980
3,000
2,962
4,000

1,000 units at 3 each were introduced to Process I. There was no stock of material or work-in-progress at the beginning or end of the period. The output of each process passes direct to the next process and finally to finished stores.

Production overhead is recovered on 100 percent of direct wages.

The following additional data are obtained:

Process Output during
the month
Percentage of normal
loss to input
Value of scrap
per unit
I
II
III
950
840
750
5%
10%
15%
2
4
5

Prepare process cost accounts and abnormal gain or loss accounts.

Solution Will update soon

Problem 2

A product passes through three process viz., Process I. Process II. and Process III. The normal wastage of each process is:

Process I: 3%; Process II: 6%; and Process III: 10%.

The percentage of normal wastage in each case is computed on the basis of the number of units entering the process concerned. The wastage of Process I is sold @ 0.25 per unit, that of Process II is sold @ 0.50 per unit and that of Process III is sold @ 1 per unit, The other expenses are:

Process I Process II Process III
Material Consumed
Direct Labour
Manufacturing expenses
1,500
7,500
1,575
2,250
12,000
1,425
750
9,750
3,015

The output of each process has been as follows:

Process
Process
Process
I
II
III
— 14,250
— 13,650
— 12,012

Prepare process cost accounts and abnormal wastage and abnormal effective accounts.

Solution Will update soon

Problem 3

Product ZENU is made by three sequential process, I,IIand llI. In process IIIa by-product arises and after further processing in process XY, at a cost of Rs. 2 per unit, by-product 'XYZ' is produced. Selling and distribution expenses of Re. 1 per unit are incurred in marketing 'XYZ' at a selling price o( Rs. 9 per unit.

Process
I
Process
II
Process
III
Standards provided for
Normal loss in process of input, of
Loss in process, having a scrap
  value, per unit,

10%

3

5%

3

10%

5

For the month of April _2 the following data are given

Process
I
Process
II
Process
III
Process
XY
Output, in units

Costs
Direct Materials-introduced
(10,000 units)
Direct materials added
Direct wages
Direct expenses
8,800



20,000
6,000
5,000
4,000
8,400




12,640
6,000
6,200
7,000
of ZENU



23,200
10,000
4,080
420
of XYZ
Total

20,000
41,840
21,000
14,280

Budgeted production overhead for the month was 84,000.

Absorption is based on a percentage of direct wages.

There are no stocks at the beginning or end of the month.

You are required, using the information given to prepare accounts for:

(a) Each process I,II and III;

(b) Process XY

Problem 4

A product passes through three processes - P, Q and R.

The details of expenses incurred on the three processes during the year 2005 were as under:

P Q R
Units Issued
Cost per Unit
Sundry Materials
Labour
Direct Expenses
Sale Price of Output (per unit)
10,000
100
10,000
30,000
6,000
120


15,000
80,000
18,150
165


5,000
65,000
27,200
250

Management expenses during the year were 80,000 and selling expenses were 50,000. These are not allocable to the processes.

Actual output of the three processes was : Process P-9,300 units; Process Q-8,400 units; process R-6,100 units.

Two-thirds of the output of Process P and one-half of the output of Process Q was passes on to the next process and the balance was sold. The entire output of Process R was sold.

The normal loss of the three processes, calculated on the input of every process, was: Process P-5%; Process Q-15%; and process R-20%.

The loss of Process P was sold at 2 per unit, that of Process Q at 5 per unit and that of Process R at 10 per unit.

Prepare the three process accounts and the Profit & Loss a/c.

Solution Will update soon