WASTES & LOSSES:

Q.7. Vishnu Motors Ltd. manufactures a component of a motor car which passes through three processes. (The
normal waste for process 1 is 20% of the units introduced. The wastage (normal and abnormal ) is sold at ₹ 50
per unit.)( 2,000 units were introduced in this process at ₹ 100 per unit). (The additional expenditure incurred
was ₹ 60,000. )

Prepare Accounts showing the cost of production per unit under the following conditions:

(i) If the production is 1,600 units

(ii) If the production is 1,500 units
(iii) If the production is 1,800 units

Solution:

(i) If the production is 1,600 units

Process Account

Dr. Cr.

Particulars Units Rate ₹ Particulars Units Rate ₹

To Raw Materials 2,000 100 2,00,000 By Normal Loss 400 50 20,000
Introduced (2,000 x 20%) (Given)
To Additional 60,000
expenditure
By Finished Stock 1,600 150 2,40,000
(Given) (WN1)

2,000 2,60,000 2,000 2,60,000

WN1:Cost of Production per unit = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (2,60,000 – 20,000)/ (2,000 – 400)

= 2,40,000/ 1,600 = ₹ 150 per unit

(ii) If the production is 1,500 units

Process Account

Dr. Cr.

Particulars Units Rate ₹ Particulars Units Rate ₹

To Raw Materials 2,000 100 2,00,000 By Normal Loss 400 50 20,000
Introduced (2,000 x 20%) (Given)
 To Additional 60,000 By Abnormal 100 150 15,000
expenditure Loss (Bal. fig) (WN1)
By Finished Stock 1,500 150 2,25,000
(Given) (WN1)

2,000 2,60,000 2,000 2,60,000

Abnormal Loss Account

Dr. Cr.

Particulars Units Rate ₹ Particulars Units Rate ₹

To Process A/c 100 150 15,000 By Residue Sale 100 50 5,000
(Given)

By Profit & 10,000

Loss A/c (Loss) (Bal. Fig)
100 15,000 100 15,000

WN1:Cost of Production per unit = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (2,60,000 – 20,000)/ (2,000 – 400)

= 2,40,000/ 1,600 = ₹ 150 per unit

(iii) If the production is 1,800 units

Process Account
Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
To Raw Materials 2,000 100 2,00,000 By Normal Loss 400 50 20,000
Introduced (2,000 x 20%) (Given)
To Additional 60,000
expenditure
By Finished Stock 1,800 150 2,70,000
(Given) (WN1)
To Abnormal Gain 200 150 30,000
(Bal. (WN1)
fig.)
2,200 2,90,000 2,200 2,90,000

Normal Loss A/c

Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
 To Process A 400 50 20,000 By Abnormal Gain 200 50 10,000
A/c (Given)

By Cash/ Debtors 200 50 10,000

A/c (Actual Sale) (Bal. (Given)
fig.)

400 20,000 400 20,000

Abnormal Gain A/c

Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
To Normal Loss A/c 200 50 10,000 By Process A/c 200 150 30,000

To Costing P&L A/c 20,000

(Bal.
Fig.)
200 30,000 200 30,000

WN1:Cost of Production per unit = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (2,60,000 – 20,000)/ (2,000 – 400)

= 2,40,000/ 1,600 = ₹ 150 per unit

Q.8 : Chicago Cycles Ltd.

Solution :

(i) If the production is 4,800 units :

Process Account

Dr. Cr.

Particulars Units Rate ₹ Particulars Units Rate ₹

To Raw Materials 6,000 100 6,00,000 By Normal Loss 1,200 50 60,000
Introduced (6,000 x 1/5) (Given)
To Additional 1,80,000
expenditure
 By Finished Stock 4,800 150 7,20,000
(Given) (WN1)

6,000 7,80,000 6,000 7,80,000

WN1:Cost of Production per unit = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (7,80,000 – 60,000)/ (6,000 – 1,200)

= 7,20,000/ 4,800 = ₹ 150 per unit

(ii) If the production is 4,500 units :

Process Account

Dr. Cr.

Particulars Units Rate ₹ Particulars Units Rate ₹

To Raw Materials 6,000 100 6,00,000 By Normal Loss 1,200 50 60,000
Introduced (6,000 x 1/5) (Given)
To Additional 1,80,000 By Abnormal 300 150 45,000
expenditure Loss (Bal. fig) (WN1)
By Finished Stock 4,500 150 6,75,000
(Given) (WN1)

6,000 7,80,000 6,000 7,80,000

Abnormal Loss Account

Dr. Cr.

Particulars Units Rate ₹ Particulars Units Rate ₹

To Process A/c 300 150 45,000 By Residue Sale 300 50 15,000
(Given)

By Profit & 30,000

Loss A/c (Loss) (Bal. Fig)
300 45,000 300 45,000

WN1:Cost of Production per unit = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (7,80,000 – 60,000)/ (6,000 – 1,200)

= 7,20,000/ 4,800 = ₹ 150 per unit

(iii) If the production is 5,400 units

Process Account
Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
To Raw Materials 6,000 100 6,00,000 By Normal Loss 1,200 50 60,000
Introduced (6,000 x 1/5) (Given)
To Additional 1,80,000
expenditure
By Finished Stock 5,400 150 8,10,000
(Given) (WN1)
To Abnormal Gain 600 150 90,000
(Bal. (WN1)
fig.)
6,600 8,70,000 6,600 8,70,000

Normal Loss A/c

Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
To Process A 1,200 50 60,000 By Abnormal Gain 600 50 30,000
A/c (Given)

By Cash/ Debtors 600 50 30,000

A/c (Actual Sale) (Bal. (Given)
fig.)

1,200 60,000 1,200 60,000

Abnormal Gain A/c

Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
To Normal Loss A/c 600 50 30,000 By Process A/c 600 150 90,000
(Bal. (WN1)
fig.)

To Costing P&L A/c 60,000

(Bal.
Fig.)
90,000 90,000
 WN1:Cost of Production per unit = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (2,60,000 – 20,000)/ (2,000 – 400)

= 2,40,000/ 1,600 = ₹ 150 per unit

Q.9. Sunder Ltd. manufactures a product which passes through two consecutive processes viz. Purvardha and
Uttarardha. The company furnishes you with the following information for the year ended 31st March, 2019.

Particulars Purvardha Uttarardha.

Basic Material 5,000 units -
Rate per unit ₹ 2.20 -

₹ ₹
Process Material 4,000 3,000
Wages 3,000 4,000
Factory Overheads 2,000 2,630
Process Loss as percentage of input * 10% 10%
Scrap value of process loss (per 100 units) 40 60

Prepare Process Account and other relevant accounts under the following circumstance assuming that the entire
process loss is Normal Loss

The entire output of Uttarardha process was sold for ₹ 30,000.

Solution: In the books of Sunder Ltd.

Purvardha Process A/c

Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
To Basic Material 5,000 2.20 11,000 By Normal Loss 500 0.40 200
(10% x 5,000 units) (WN 1)
To Process Material 4,000
To Wages 3,000
To Factory
Overheads 2,000

By Uttarardha 4,500 4.40 19,800

Process A/c (Bal. (WN2)
(Transfer) Fig.)
5,000 20,000 5,000 20,000
 Uttarardha Process A/c
Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
To Purvardha 4,500 4.40 19,800 By Normal Loss 450 0.60 270
Process A/c (10% x 4,500 units) (WN3)
(Transfer)
To Process Material 3,000
To Wages 4,000
To Factory
Overheads 2,630

By Finished Stock 4,050 7.20 29,160

c/d (Bal. (WN4)
Fig.)
4,500 29,430 4,500 29,430
To Finished Stock 4,050 7.20 29,160 By Cash/ Bank A/c 4,050 30,000
b/d (Given)
To Costing P&L 840
A/c (Bal.
Fig.)
4,050 30,000 4,050 30,000

WN1:

Units ₹
100 40
1 ? = (1 x40)/100 = 40/100 = ₹ 0.40 per unit
Therefore Scrap value of process loss of Purvardha Process = ₹ 0.40 per unit

WN2: Cost of Production per unit of Purvardha Process = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (20,000 – 200)/(5,000 -500)

= 19,800/ 4,500 = ₹ 4.40 per unit

WN3:

Units ₹
100 60
1 ? = (1 x60)/100 = 60/100 = ₹ 0.60 per unit
Therefore Scrap value of process loss of Utharardha Process = ₹ 0.60 per unit

WN4: Cost of Production per unit of Utharardha Process = Normal Cost/ Normal units produced
 = (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (29,430 – 270)/ (4,500 – 450)

= 29,160/ 4,050 = ₹ 7.20 per unit

Q. 10 : Golly Ltd.

Note : Students are advised to ignore units in this question.

Solution :

In the books of Goli Ltd.

Crushing Process A/c

Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
₹p.u ₹p.u
To Basic Material 660 100 66,000 By Normal Loss 132 4 528
(20% x 660 units) (40/10)
To Process Material 24,000
To Wages 18,000
To Factory
Overheads 12,000

By Transfer to 528 226.27 1,19,472

Bottling Process (Bal. (WN2)
A/c fig.) COP
660 1,20,000 660 1,20,000

Bottling Process A/c

Dr. Cr.
Particulars Units Rate ₹ Particulars Units Rate ₹
₹p.u ₹p.u
To Transfer from 528 226.27 1,19,472 By Normal Loss 26 6 156
Crushing Process (5% x 528) (60/10)
A/c
To Process Material 18,000
To Wages 24,000
To Factory
Overheads 15,780

By Finished Stock 502 352.78 1,77,096

c/d (Bal. (WN4)
Fig.) COP
528 1,77,252 528 1,77,252
 To Finished Stock 502 352.78 1,77,096 By Cash/ Bank A/c 1,80,000
b/d (Sales) (Given)

To Costing P&L 2,904

A/C (Profit)
(Bal fig.)
30,000 30,000

WN1: Calculation of Cost p.u of Scrap sold of Crushing :

Units ₹
10 40
1 ? = (1 x 40)/10 = 40/10 = ₹ 4 per unit

WN2: Cost per unit of Crushing = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

=(1,20,000 – 528) / (660 - 132)

= 1,19,472 / 528 = ₹ 226.27 per unit

WN3: Calculation of Cost p.u of Scrap sold of Bottling:

Units ₹
10 60
1 ? = (1 x 60)/10 = 60/100 = ₹ 6 per unit

WN4: Cost per unit of Bottling = Normal Cost/ Normal units produced

= (Total Cost of Production – Scrap value of Normal Loss)/ (Input units–Normal Loss units)

= (1,77,252 – 156) / ( 528 - 26)

= 1,77,096 / 502 = ₹ 352.78 per unit