No.

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01.

In a factory, process cost accounts are in use for a certain period the production of the commodity was 1,000 tonnes. The product passes through three processes, viz., A, B, C and the raw materials were added in all the processes. The costs were as follows: Material Labour Manufacturing expenses Process A Rs. 18,000 42,500 11,500  Process B Rs. 31,500 13,000 24,500  Process C Rs. 11,500 16,750 27,250  Assuming that there was no work-in-process either at the beginning or at the end. Show the process costs for each process and the total cost of the finished product. The production of 1,000 tonnes is the same in each process.

Solution » Process A

Dr Process A a/c Cr Particulars Quantity (in Units) Amount (in Rs) Particulars Quantity (in Units) Amount (in Rs) To Material To Labor To Manufacturing Expenses 1,000 18,000 42,500 11,500 By Process B a/c 1,000 72,000   1,000 72,000   1,000 72,000             Working Notes » Hide/Show • Gross/Total Input [GI/TI] GI/TI = Materials introduced in the process = 1,000 units [Given] • Actual Output [AO] AO = 1,000 units [Given] • Total Cost [TC] TC = Rs. 18,000 + Rs. 42,500 + Rs. 11,500 = Rs. 72,000 • Cost of Output per unit [CO/Unit] CO/Unit = TC AO = Rs. 72,000 1,000 units = Rs. 72/unit This formula can be used only in cases where there are no losses and stocks. Valuation » The output is to be valued at Cost per unit. • Actual Output [VAO] VAO = AO × CO/Unit = 1,000 units × Rs. 72/unit = Rs. 72,000

Solution » Process B

Dr Process B a/c Cr Particulars Quantity (in Units) Amount (in Rs) Particulars Quantity (in Units) Amount (in Rs) To Process A a/c To Material To Labor To Manufacturing Expenses 1,000 72,000 31,500 13,000 24,500 By Process B a/c 1,000 1,41,000   1,000 1,41,000   1,000 1,41,000             Working Notes » Hide/Show • Gross/Total Input [GI/TI] GI/TI = Input received from the previous process i.e. process A = 1,000 units • Actual Output [AO] AO = 1,000 units [Given] • Total Cost [TC] TC = Rs. 72,000 + Rs. 31,500 + Rs. 13,000 + Rs. 24,500 = Rs. 1,41,000 • Cost of Output per unit [CO/Unit] CO/Unit = TC AO = Rs. 141,000 1,000 units = Rs. 141/unit This formula can be used only in cases where there are no losses and stocks. Valuation » The output is to be valued at Cost per unit. • Actual Output [VAO] VAO = AO × CO/Unit = 1,000 units × Rs. 141/unit = Rs. 141,000

Solution » Process C

Dr Process C a/c Cr Particulars Quantity (in Units) Amount (in Rs) Particulars Quantity (in Units) Amount (in Rs) To Process B a/c To Material To Labor To Manufacturing Expenses 1,000 1,41,000 11,500 16,750 27,250 By Finished Stock a/c 1,000 1,96,500   1,000 1,96,500   1,000 1,96,500             Working Notes » Hide/Show • Gross/Total Input [GI/TI] GI/TI = Input received from the previous process i.e. process B = 1,000 units • Actual Output [AO] AO = 1,000 units [Given] • Total Cost [TC] TC = Rs. 1,41,000 + Rs. 11,500 + Rs. 16,750 + Rs. 27,250 = Rs. 1,96,500 • Cost of Output per unit [CO/Unit] CO/Unit = TC AO = Rs. 196,500 1,000 units = Rs. 196.50/unit This formula can be used only in cases where there are no losses and stocks. Valuation » The output is to be valued at Cost per unit. • Actual Output [VAO] VAO = AO × CO/Unit = 1,000 units × Rs. 196.50/unit = Rs. 196,500

Author Credit : The Edifier