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# Process Costing Problems & Solutions Problem no 1: Meghna Company began 1993 with 3000 units in wprk-in-process.

Calculate the costs of goods completed, cost of ending inventory, cost of abnormal rework and abnormal spoilage. Problem no 4: Del Co. Ltd. began the current period with 1000 units, which were 60% complete. During the period, works on additional 50000 units were started. Materials are added at the start of the process while labor is added when units are 40% complete. Overhead costs are incurred uniformly. Units are inspected for rework when they are 50% complete. Rejected units are returned to 20% complete point for rework. Normal rework is 3% of the units inspected. Units are again inspected when they are 70% complete. Rejected units are thrown away as spoiled. Normal spoilage is 1% of the units inspected. There were 52000 units inspected for rework and 800 units were rejected as spoilage. Ending work in process consists of 6000 units, 80% complete. Costs attached to opening inventory were tk. 45000 for material, tk. 21000 for labor and tk. 50000 for overheads; Current costs were material tk. 225000, labor tk. 106100 and tk. 421680 for overhead. Using weighted average method, find out i) Cost of goods completed ii) Cost of ending work in process iii) Cost of abnormal rework and iv) Cost of abnormal spoilage. Solution: (problem 4) Statement of production and Equivalent Units of production Element of production Inputs Opening WIP Introduced during the period Units accounts for Outputs Finished Goods Ending WIP Normal Spoilage Abnormal Spoilage Normal Rework Abnormal Rework Equivalent Units Physical Units 1000 50000 51000 44200 6000 510 290 51000 44200 6000 510 290 51000 100 100 100 100 44200 6000 510 290 1560 440 53000 100 100 100 100 100 100 44200 4800 357 203 468 132 50160 100 80 70 70 30 30 Material Units % Equivalent Units Labor Overhead Units % Units %

Statement of costs and costs per equivalent unit Elements of costs Total Material Labor Costs transferred in: Opening inventory of WIP 116000 45000 21000 Current years costs 752680 225000 106100 Total Costs 868680 270000 121100 Equivalent units Cost per equivalent units 51 000 5.29 53 000 2.40

## Overhead 50000 421680 471680 50 160 9.40 Amount 7056 957 83 47

Statement showing the evaluation of different elements of production: Category Costs Shifted Ratio to Cost of Normal L: 1560*2.40 = 3744 FG 44200/51000 Rework O: 468*9.40 = 4399 WIP 6000/51000 Total 8143 NS 510/51000 AS 290/51000 Cost of Abnormal L: 440*2.40 = 1056 Rework O: 132*9.40 = 1241 Total 2297 Cost of Normal M: 510*5.29 = 2698 FG 44200/50200 Spoilage L: 510*2.40 = 1224 WIP 6000/50200 O: 357*9.40 = 3356 Share of NR = 83 Total 7361 Cost of Abnormal M: 290*5.29 = 1534 Spoilage L: 290*2.40 = 696 O: 203*9.40 = 1908 Share of NR = 47 Total 4185 Cost of ending M: 6000*5.29 = 31740 WIP L: 6000*2.40 = 14400 O: 4800*9.40 = 45120 Share of NR = 957 Share of NS = 878 Total 93095 Cost of Finished M: 44200*5.29 = 233818 Goods L: 44200*2.40 = 106080 O: 44200*9.40 = 415480 Share of NR = 7056 Share of NS = 6482 Total = 768916

6482 878

Elements of costs WIP, beginning Material Labor Overhead Introduced during the year Material Labor Overhead

Units 1000

Process Account Costs Elements of Production Abnormal Rework 45 000 Abnormal Spoilage 21 000 Normal Spoilage 50 000 Finished Goods Balance c/d (WIP, ending) 2 25 000 1 06 100 4 21 680 8 68 780

Units

5000 0

5100 0

5100 0

8 68 780