Scribd Logo
Upload

Welcome to Scribd!

  • Process Costing

    Uploaded by

    Jatin Nasa
    33 views28 pages
    Project

    Original Title

    process costing

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    Project

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    33 views28 pages

    Process Costing

    Uploaded by

    Jatin Nasa
    Project

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 28
    n> PRoess costinG 2 Process 49 bw 1g whine. Fs ply ay Scanned with CamScanner Scanned with CamScanner PROCESS LOSSES AND WASTAGE In ing ii ai COURSE Of the amfacturing industries, there is always some loss or wastage of units in the manufacturing process, This loss can be classified as (a) Normal (4) Abnormal. Normal process loss This ; is unavoidayee re the Usual percentage of wastage arising ina particular process or operation. It From the ole because of nature of the material or the process. It also includes units withdrawn ‘om the process for test or sampling. __.__ The loss due to normal wastage should be charged to a the effectives, i. the good units arising out of the process. Thus, cost of spoiled and lost units is absorbed as an additional cost of g00d units produced by the process. In this connection the following points must not be lost sight ° (a) In some cases the defective or scrapped units prossess some value. This amount should be credited to the process concerned. Mlustration 9.2. 200 tonnes of raw material are used for producing a commodity which passes through two processes. The costs are as follows : Process / Process IT z z Materials 2,000 = Labour 1,000 500 500 300 Works Expenses 10% of the material is wasted in the process. The wastage has been normal. The scrap realised € 50. Show Process No. 1 Account. Solution : PROCESS NO. 1 Particulars Units (in | Amount Particulars Units (in] Amount tonnes) z tonnes) = To Materials 200 2,000 |} By Normal Wastage 20 50 To Labour 1,000 |] By Transfer to Process 2 180 3,450°8 al) To Works Expenses 500 - 200] “3,500 200] 3,00 Cost per unit of Process No. 1 is @ 19.17 per tonne. (3450 + #0) (b) In case the scrap is of very small value, it will be inexpedient to credit each process with the amount which the scrap can realise. It will be better to credit the total proceeds of the scrap in such a case to Works Overheads Account. In any case loss in weight or volume must be shown in the Process Account. (c) In some processes a proportion of the output must be re-worked either in the same process or an earlier one. The value of such output is not more than the value of crude materials to which it corresponds. The relevant process should be credited with the value of such crude material and should be charged to the process to which such material is relegated. Scanned with CamScanner Scanned with CamScanner Mustration’®.15. A product passes through three processes, A, B and C. The normal wastage of eadivfrocess is as follows : Process A—3 per cent Process B—S5 per cent Process C—8 per cent Wastage of Process 4 was sold at 25 P. per unit, that of Process B at 50 P. per unit and that of Process Cat Re. I per unit. 10,000 units were issued to Process A in the beginning of October, 2012 at a cost of Re. | per unit. The other expenses were as follows : Process 4 Process B Process C e z z ‘Sundry Materials 1,000 1,500 300 Lae ae 5,000 8,000 6,500 eee, 1,050 188 , Acad coeat aes: 1,18 2,009 Process A » 9,500 units Process B + 9,100 units Process C 8,100 units Scanned with CamScanner : 365 process COSTING are the Process Accounts, assuming that there were no opening or closing stocks. Also the abnormal Wastage and Abnormal Effectives Accounts, « give 7 PROCESS 4 ACCOUNT jo ee Units [ Amount Particulars Units] _Amount - z z : itsissued (Metesal By Normal Wastage—3% bre | perunit 10.000 | 10,000 0 10,000 units sold at oe Materials 1.000] 25 p. per uni | 300 75 we) Ls yen 5,000 By Abnormal Wastagg2) 7 200) * 350(¥ 2 E s 1.050 By Process 4 (Output (402 inect Expenses y Proc ip oo ansered) 9 9,500] ® 16,625") 10.000 | 17,050 eV 10,000[ 17.050 PROCESS B ACCOUNT Particulars: Units | Amount Particulars Units} Amount Fee x ToProcess 4 (Output reed.) | 9,500 | ¥ 16.625 By Normal Wastage—s% To Sundry Materials 1,500 09,500 units sold at To Wages { 8000 50.p. per unit To Direct Expenses 1.188} By Process Cc 2° To Abnormal Effectives / 73) * 25 (output transferred) wy} @> (coms 27,538 PROCESS C ACCOUNT Particulars Units | Amount Particulars Units | Amount z ToProcess B (Output reed.) | 9,100 | *. z 27,300 |} By Normal Wastage—80% To Sundry Materials 500 0f 9,100 units sold at To Wages [ 6.500 Re.I perunit fo Rs To Direct Expenses 2,009 }} By Abnormal Wastag62+] S975 By Finished stock (ouput) |. 8,100 9.100 | 36.309 Gwe Fe | 9.100 [36,309 Calculation of abnormal wastage and abnorusot etfeetives (Bcd om Marwmnd ¢ Process A: NAL Sst Vom eabeernat Wastge So Process B: Fees Cost of Abnormal Effectives WW 3 Frocess C : she Cost of Abnormal Wastage = “8372 *272=% 1,156 woe Neral dont of 270 « I$0—38 £175 ) n - P GIP (prune I gm - 3ay SS — . Scanned with CamScanner 366 Process Costing ABNORMAL WASTAGE ACCOUNT Particulars Units | Amount |] ___ Particulars Units | Amount Tle To Process A 200 350 |] By Sale of wasted units : To Process C 272} 1,156 Process A @ 25 P. per unit 200 50 Process C @ Re. | per unit 272 By Costing Profit and Loss A/e ( (y) _—_+__+ 472 1,506 NORMAL WASTAGE ACCOUNT Particulars Units | Amount Particulars Units Amount z z To Process 300 75 || By Sale proceeds of To Process B 475] | 238 wasted units . To Process C 728 728 A ®@ . co 300 Bb @S?7 (> 400 ce “18 728 By Abnormal bobs Effectives Ale GP 75 roar |} 7 Oe 1,503 u eS "ABNORMAL EFFECTIVES ACCOUNT Particulars Particulars Units | _Amount g zg To Normal Wastage By Process B 225 Alc @ 50 P. per unit . To Costing Profit and nv Loss Ae b> he “Note : Actual wastage in Process B is only 400 units, but we have credited Process A/c with the sale proceeds of normal wastage i.e. 475 units. The shortfall in the sale of normal wastage of 75 units @ 50. per unit has been debited to Abnormal Effectives A/c and credited to Normal Wastage Ale. Scanned with CamScanner m 9.13. A product is completed in two processes A and B. During a particular Tilu: ial was 5,000 units at € 2 per unit. Other month, the shput to process A of the basic raw-materi: information for the month is as follows : Particulars Process A Process B Output (units) 4,700 4,300 Normal Loss (% of input) 5 10 Scrap Value per Unit (@) 1 5 Direct Wages (%) 3,000 5,000 Direct Expenses (2) 9,750 9,910 Total overheads, = 16,000 were recovered as Percentage of direct wages. 4.5 There were no opening or closing work-in-progress stocks, Prepare Process A and Process B Accounts. [B.Com (Pass) Delhi, 2000] Scanned with CamScanner Process Costina 363 Solution : PROCESS 4 ACCOUNT Particular Units ty Particulars Units = To Input] Podtin 5,000] 10,000 |] By Normal Wastage @ 1 250 250 To Direct Wages If 3,000 |} By Abnormal To Direct Expenses 9,750 Wastage (WN 1) 50 To Overheads x3 6,000 |} By Process B Account os \6 @26 per unit 4,700 5,000 | 28,759 3,000 E eS PROCESS B ACCOUNT Particulars Units z Particulars Units] z 4,700 |F 28.200 || By Normal Wastage™®> S| 470| 2,350 To Process 4 ; To Direct Wages [5,000 |} By Finished Goods A/c am To Direct Expenses 9,910 @ 12 per unit 4,300] 51,600.23 To Overheads [60° % 10,000 — To Abnormal Effectives * 840 Qn 4,770 [53,950 Working Notes : Citeh wrt, ~ Nor 1. Cost of Abnormal Wastage zi fre Novel ot > Seep 28,750-250 28,500° P* ple, W 4,750 *59= "4759 * 50=% 300 uwik(p.u) —- 2. Cost of Abnormal Effectves in Process B Doyle — Nowe’ : 53,110 -2,350 30770 =P oe bs oy = x70 =% 840 ="4,700-470_*70="4.230 Ilustration 9.14. A Product passes through two distinct processes, A and B. From the following information you are required to prepare the process accounts, abnromal loss/profit accounts. Units issued-Process A 10,000 units of € 10 each. Process Process B Materials added % 40,000 30,000 Direct Labour % 20,000 % 24,000 Overheads 5 12,600 % 20,500 Normal Wastage (% of input) 5% 3% Scrap value of Normal Loss BWperunit & 10 per unit Output (units) 9,400 9,000 [B. Com. (Pass) Delhi, 1993] Solution ; AACCOUNT eras Toh To Maca 10,000 | 1,00,000 |} By Normal Wastage © S 2,500 ToDitet Labo 40,000 |} By Abnormal Wastage 1,791 Tovrea 20,000 |} By Process B (transfer) 1,68,309 12.600 1.72.600 Scanned with CamScanner PROCESS B ACCOUNT Particulars Units Particulars z — ->—— To Process A 9,400 | 1,68,309 |] By Normal Wastage’@) ! 470] | 4.709 To Material 30,000 |} By Finished Goods 9,000) 239.975 To Direct Labour 24,000 To Overheads 20,500 To Abnormal Effectives 1,866 9.470 | 2,44,675 9,470 | 2.44,675 ‘ABNORMAL WASTAGE (LOSS) ACCOUNT Particulars Units z Particulars [_units[ To Process A 100 | 1,791 |] By Sale Proceeds@® S 100 500 Particulars To Normal Wastage (Q \>~ To Costing P& L A/c Working Notes : ABNORMAL Particulars “~ 70|-> 700 |} By Process B 1,166 70 | _1,866 By Costing P & L A/c EFFECTIVES (PROFIT) ACCOUNT 1,866 1,866 1. Cost of Abnormal Wastage in Process A Normal Output Normal Cost x Abnormal Wastage in units 470.100 h00= 00 « 100=F 1,791 2. Amount of Abnormal Effectives in Process B 2,38,109 Zz 8,930 * 70 =2 1,866 Scanned with CamScanner Illustrati 19. The product of a company passes through three different processes—, B and C. It is @scertained from past experiences that wastage in each process is incurred as under : Process A: 2% Process B: 5% Process C: 10% , The percentage of ‘wastage in each case is computed on the basis of number of units entering the process concerned, . The wastage of each process has a scrap value. The wastage of process 4 and B is sold at Re._1 per unit and that of process C at % 4 per unit. en The company gives u the following information for the month of July 2 eo peakdes 2,000 units of crude material were introduced in process A at a cost of & 8 per unit this the following were other expenses : Scanned with CamScanner Process Costing 370 Process Process Process 4 eB c 3000 aa - 3, | Materials consumed 8000000 «Gn Direct Labour 000 1,000 3,000 Works Expenses ~ Units Units Units Output ve aa 4 Stock : July 1 Lio 400 oy uly 31 si 21 365 ‘Stock valuation on July 1, per unit 9 Stocks on 31st July, 2016 are to be valued at cost as shown | by month’s gpeoction accounts, Prepare the Process Accounts. Ly Fo FIED) Wt Solution : PROCESS 4 Paniculars Units | Amount Particulars € z To Units introduced 2,000 | 16,000 |} By Normal Wastage® | 40 40 To Materials 8,000 |} By Abnormal Wastage 10 194 To Direct Labour 12,000 (Note 1) (2 4-368 To Works Expenses 2,000 |} By Process 4 Stock ale @¥ 19.368 1,950] 37,766 gy 2,000 |_ 38.000 |] 2,000[ 38.000 ———— PROCESS A STOCK ACCOUNT. Particulars Units | Amount Particulars Units | Amount f z z ToBrimee bt C . 3,800 |] By Process B Process As in 368 37,766 (balancing figure) 2,000] 38,661 By Balance e/d (@% 19.368) 150] 2,905 2.150 | 41,566 2.50] a1 7566 PROCESS B 3 ‘Amount Particulars z To Input of Material A 2, To Material td eyed To Direct Labour 8,000 To Works Expenses 1,000 To Abnormal Effectives . (Note 2) i PROCESS PST B STOCK ACCOUNT Particulars Units [Amount Parti = 7 Particulars Units |_ Amount To Balance b/d ( * 300] 8,100] f 2 ty Process C (bal. 1,925 | 51,226 |] By Balance c/d al. fig.) To Process Br) 4.4.) ~ . (@2 26.6) " Scanned with CamScanner Process CosTING 371 PROCESS C Amount Particulars Units Amount {___ Particulars] z - A9a5 of | z 1825 | 18,682 |] By Normal Wastage( "| 183 732 2,000 |} By Abnormal Wastage n 6.000 ff (Note3) 52] 1,867 jorks Expenses 3.000 |] By Process C Stock A/e BME (@235.901) 1,590 825 | 59,682 825 PROCESS C STOCK ACCOUNT Particulars [— Units | Amount Particulars [__Gnits[_ Amount z lance bid ed 500 By Finished Goods Ree 1,590 Stock Ale 2,090| 75.333 2.090 [75.333 2,090) 75.333 ABNORMAL EFFECTIVES ACCOUNT Parieulars Units | Amount Particulars Units | Amount Si tT z To Normal Wastage A/c By Process B 28 665 (Note 4) 25 25 To Costing P. & L. Ale 640 25 [665 ABNORMAL WASTAGE ACCOUNT Particulars Units [ Amount [| Particulars Units] Amount z To Process A By Sale of waste units : To Process C Process. © | 10 10 Process CO) 32 208 By Costing P. & L. Alc 1.843 @| 2061 == NORMAL WASTAGE ACCOUNT ——Panticulars [Units | Amount Particulars Units] Amount h “be, 98 ce z PoProcess 40 By Sale of waste whe 298 847 To Process B 100 By Abnormal 5 x} 25 25 To Process C Working Notes : 1. Normal Output Normal Cost Cost of Abnormal Wastage - (10 units) : 37,960 1,960 * !0=% 194 Etfectives A/c 1,960 units 37,960 Scanned with CamScanner Process Costing 372 1,900 units 2, Normal Output 0 iy Normal Cost Cost of Abnormal Effectives ~ (25 units) : 50,561 LSS) 25 = 665 oral Ou 1,642 units 3. Normal Outp¢ seni ‘Normal Cost ; Cost of Abnorm! Wastage ~ (51 units) : 38,950 1.642 x 5253 1,067 4, Actual Wastage in Prow'ess a Proceeds credited to Pro.7ess Excess proceeds credited Each unit realised Re. 1, Total amount to be debited to Abnormal Effectives Account 225 Mlustration 9.20. A product passes through three processes—A, B and C. The details of expenses incurred on the three processe’s during the year 2016 were as under : Process 4 B c Units issued/introduced cost per unit € 100 10,000 : z ‘Sundry Materials, [rat 15,000 5,000 Labour 30,000 80,000 65,000 Direct Expenses 6,000 18,150 27,200 Selling price per unit of output 120 165 250 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 A—9,300 units, B—S,400 units and C—2,100 units. Two-thirds of the output of Process 4 and one-half of the-output.of Process B was passed on to th he next process and the balance was sold. The entize output of Process C was sold. The normal loss ofthe three processes, calculated on the input of every process was : Process A—5%, B—15% and C—20%. The Loss of Process A was sold at €2.perunttythat of B at 85 per unit and of Process Cat %10 perupit. Prepare the three Processes pecnats eae Poa cd Loss Account, Solution : - —— PROCESS 4 ACCOUNT. (a =) Particulars Particulars To Units brought in By Normal Loss( 2 1,000 (100 ~ 10,000) 10,00,000 |} By Abnormal Loss 200 | 22,000 To Sundry Materials 10,000 }) By Process 2 A/c . ~ To Labour 30,000 (@Z N10 per unit ->) To Direct Expenses 6,000 WN1) 6 ano) 6.82,000 By Profit & Loss Ave 13%. (110 * 3,100 \) 10,000 | 10,46,000 Scanned with CamScanner

    You might also like