Q.

2 Concept based short questions

Student to answer 5 sub question out of 8 sub questions.

1) Normal wastage
2) Abnormal Wastage
3) Equivalent Production
4) Inter Process Profit
5) Allocation of Overheads
6) Allocation Vs. Apportionment

Q. 3 Practical Problems
Student to answer 2 sub question out of 3 sub questions.

1. Process Cos ng

Illustration 10:

A product passes through three processes A, B and C after which it is transferred to finished
store. The following information is supplied for the month of November, 2014.

Particulars Process Process Process Finished

A B C Stock
Opening Stock (₹) 20,000 24,000 16,000 60,000
Direct Materials (₹) 40,000 42,000 60,000 -
Direct Wages (₹) 30,000 30,000 32,000 -
Direct Expenses (₹) 10,000 5,000 30,000 -
Closing Stock (₹) 18,000 7,000 50,000 -
Production Overheads (₹) 10,000 12,000 8,000 30,000
Inter process profit for Opening Stock (₹) - 4,000 4,000 22,000
Profit percentage on Cost price (%) 33 1/3% 25% 25% -

Closing stock in each process is valued at Prime cost and Finished stock has been valued at the
price at which it was received from Process C. Sales during the month amounted to Rs.7,00,000.
Prepare process accounts showing Profit elements at each stage.

Illustration No.17
Avdoot Ltd., a manufacturer of a specialised product, is have a process costing system. The stock
of work-in-progress at the end of each month is valued on First In First Out (FIFO) basis. At the
beginning of January 2014 the stock of work-in-progress was 2000 units (40% completed) which
was valued as:
Material Rs.18000
Labour Rs.17000
Overheads Rs.5000
During the month of January 2014, actual issue of materials for the production purpose was
3,42,500. Wages and overheads in the month of January, 2014 amounted to 4,02,600 and
1,12,200 respectively. Finished production taken into the stock in the month was 12,500 units.
There was no loss in the process. At the end of the month of January, 2014 the stock of Work-In-
Progress was 2500 units (60% complete as to Labour and Overheads and 80% complete as to
materials). Prepare the following statements for January, 2014.
(a) No. of units introduced in the process
(b) statement of equivalent production
(c) Statement of Cost
(d) statement of evaluation.
(e) Process Account.

Illustration No.18
Following information is available regarding Process A for the month of February, 2014:

Units
4,000
Opening Stock
Degree of Completion:
-Material 100%
-Labour and Overhead 25% each
New Units input in process 16,000
Total Units Processed 20,000
Production Report shows the following results:
Units Completed 14,000
Un Units completed on 28th February, 2014:
Closing Stock:
-Material 100%
-Labour and Overhead 33 1/3 rd% of each 6,000
-Loss in production NIL
Cost Record
Work-in-progress as on 31st January, 2014: Rs.
-Material 1,200
-Labour 200
-Overhead 200
Cost for February 2014:
-Material 5,120
-Labour 3,000
-Overhead 3,000
Total Cost to be accounted for 12,750

Presuming that FIFO method of Inventory Costing is used, prepare:

(i) Statement of Equivalent Production
(ii) Statement showing Cost for each element
(iii) Statement of Apportionment of Cost
(iv) Process Cost Account for Process A
Illustration 21: (Normal Loss)

In a process costing system, the following details relate to the month of January, 2017:

Opening Stock 1,500 Units valued at Rs. 2,325

Degree of their completion:
Materials 80%
Labour 60%
Overheads 60%
Transfer from previous process 12,500 units
Value Rs.12,080
Transfer to next process 12,000 units
Materials added in process Nil
Labour added in process Rs.6,030
Overheads added in process Rs.9,045
Units scrapped 800 units
Value realised Rs.200
Closing Stock 1,200 units
Degree of their completion:
Materials 90%
Labour 80%
Overhead 80%
You are required to work out: (1) Equivalent Production (2) Cost Statement showing cost per
unit (3) Process Evaluation Statement showing the value of opening stock and closing stock;
and (4) Process Cost Account.

2. Cost Allocation:
Illustration 6:
The Modern Company has four departments, A, B and C are the production departments and Di
servicing department. The actual costs for a period are as follows:

Particulars Rs.(000)
Indirect Materials
Production Department: A 900
B 1,200
C 200
Servicing Department: D 1,500
Indirect Wages
Production Department: A 900
B 1,100
C 300
Servicing Department: D 1,000
Rent 2,000
Repair 1,200
Depreciation 900
Light 200
Supervision 3,000
Insurance 1,000
Employee's Insurance (Employer's Liability) 300
Power 1,800
The following data are also available in respect of four departments:

Particulars Departments
A B C D
Rs. Rs. Rs. Rs.
Area (sq. ft.) 150 110 90 50
No. of workers (Nos.) 24 16 12 8
Total wages ('000) 8,000 6,000 4,000 2,000
Value of plant ('000) 24,000 18,000 12,000 6,000
Value of stock ('000) 15,000 9,000 6,000 -

Apportion the above costs to the various departments on the most equitable method.
Notes:
1. Insurance has been taken for stock,
2. Power expenses are to be apportioned on the basis of value of plant.

Illustration 9: (Primary + Secondary)

M & Co. has 3 production departments and 2 service departments. The expenses are as below:

Particulars Total Rs.

Consumable Stores 15,400
Supervision 22,800
Rent & Rates 10,000
Insurance 2,000
Depreciation 30,000
Power 9,000
Light & Heat 4,000
Total 93,200

The following information is available:

Particulars Production Departments Service Department

Machine Assembly Finishing Stores Repairs &
Shop Shop Shop Maint.
Direct Materials 34% 39% 13% 4% 10%
Direct Wages 35% 22% 27% 10% 7%
Ares (sq. ft.) 5,250 3,500 4,375 1,750 2,625
Asset Value 2,00,000 2,25,000 50,000 12,500 12,500
HP. x Hours x LF 10,800 7,200 -

(a) Prepare the Primary Distribution Statement using the most appropriate basis for
apportionment.
(b) The Machine Shop, Assembly Shop and Finishing Departments have issued stores
requisitions in the ratio of 9: 6:5, and repairs requests in the ratio of 2: 3: 1. Prepare the
Secondary Distribution Statement on non-reciprocal (direct distribution) basis.
Illustration 10:

Radha Enterprises has three production departments A, B and C and one service department S.
The following figures are available for one month of 25 working days of 8 hours each day. All
departments worked all these days with full attendance.

Particulars Total Production Departments

Rs. Dept. A B C
Rs. Rs. Rs. Rs.
Power and Lighting 1,100 300 200 250 350
Supervisor's Salary 1,500 - - - -
Rent 600 - - - -
Canteen Expenses 500 - - - -
Others 1,100 140 210 470 280
4,800
The following additional information is available:

Particulars Production Departments

Service A B C
Dept.
Supervisor's Salary 20% 20% 30% 30%
Floor Area in sq. feet 800 700 900 600
Number of workers 20 30 30 20
Service rendered by service
department
to production departments 20% 30% 50%

You are required to calculate the labour hour rate of each of the department A, B and C

Illustration 11:

The summary as per primary distribution is as follows:

Production departments A- ₹ 2,400; B-₹2,100 and C-₹1,500
Service departments X-₹ 700; Y ₹-900
Expenses of service departments are distributed in the ratios of:
X dept. A-20%, B-40%, C- 30% and Y- 10%
Y dept. A-40%, В -20%, C- 20% and X-20%

Show the distribution of service costs among A, B and C under repeated distribution method.