process costing examples-muhammadazeem
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Ca Particular Input Output Normal Abnormal Abnormal
Loss Loss gain
Ltrs Ltrs Ltrs Ltrs Ltrs
1 No losses 12,000 12,000 - - -
2 Normal loss- no S.V 12,000 10,000 2,000 (1/6) - -
3 Abnormal loss - no 12,000 9,000 2,000 (1/6) 1,000 -
4 Normal loss - with S 12,000 10,000 2,000 (1/6) - -
5 Abnormal loss - with 12,000 9,000 2,000 (1/6) 1,000 -
6 Abnormal gain - no 12,000 11,000 2,000 (1/6) - 1,000
7 Abnormal gain - wit 12,000 11,000 2,000 (1/6) - 1,000
Required no.1 When No losses in the process
Process Cost Account
Units Rate Cost Units
Input 12,000 10 120,000 Output 12,000
12,000 120,000 12,000
Cost per unit = Cost of input / Nos. of output units (Expected output units)
= Rs. 120,000 / 12,000 units
= Rs. 10 per unit.
Input cost includes cost of direct material and cost of conversion. In this there is
units, therefore the cost of output is equal to cost of input.
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Required no.2: When Normal loss in the process (With NO salvage value)
Process Cost Account
Units Rate Cost units
Input 12,000 10 120,000 Output 10,000
Normal loss 2,000
12,000 120,000 12,000
Cost per unit = Cost of input / Nos. of Expected output units (excluding normal lo= Rs. 120,000 / 10,000 units
= Rs. 12 per unit.
The normal loss is inherient in nature, and it occur under efficient operating condition an
unavoidable.
Cost is not assigned to nos. of units lost (Normal).
The cost of material loss (Normal) is transferred to nos. of expected goods outpu
increases the per unit cost of finished goods.
For Input: For OutputWork in process Debit Finished goods Debit
Raw material Credit Work in process
Accured payrol Credit
FOH (Applied) Credit No entry for normal loss because there is
normal loss units.
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Required no.3: When Abnormal loss in the process (With NO salvage value)
Process Cost Account
units Rate Cost units
Input 12,000 10 120,000 Output 9,000
Normal loss 2,000
Abnormal Loss 1,000
12,000 120,000 12,000
Cost per unit = Cost of input / Nos. of Expected output units (including abnormal
= Rs. 120,000 / 10,000 units
= Rs. 12 per unit.
Abnormal loss Account
Units Rate Cost Units
Process cost accou 1,000 12 12,000 Profit and loss a/c 1,000
1,000 12,000 1,000
1 These losses are not an inherent in nature and that is why it is called abnormal or contr
2
3 It is treated as a periodic cost and written off in the profit statement at the end of accou
4 Cost of abnormal loss in not included in cost of ending inventory, if any.
For Input For Abnormal Loss:
Same entry a) Transferred from Process account to Abnormal loss accou
For Output Abnormal loss account Debit
Same entry Process cost account
b) Transferred to Profit and loss account:
It will be excluded from the process account having a value equal to the value of goo
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Profit and loss account Debit
Abnormal loss account
For normal loss:
No entry will be made
Required no.4: When Normal loss in the process (With salvage value)
Process Cost Account
Units Rate Cost Units
Input 12,000 10 120,000 Output 10,000
Normal loss 2,000
(salvage value)
12,000 120,000 12,000
Cost per unit = (Cost of input - Salvage value of normal loss) / Nos. of Expected o
= [Rs. 120,000 - 10,000 (2,000 units x Rs. 5)] / 10,000 units
= Rs. 11 per unit.
Spoiled goods (Normal loss) Account
Units Rate Cost Units
Process cost accou 2,000 5 10,000 Cash 2,000
2,000 10,000 2,000
Accounting Entries:
1) For Input: 2) For Output:
Same entry Same entry
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3) For Normal Loss - Salvage value:
a) Recording of normal loss with salvage value:
Spoiled goods (Nor 10,000
Process account 10,000
b) Sale of normal loss
Cash 10,000
Spoiled goods (Normal loss) 10,000
1 The salvage value of normal loss, if any, will reduce the process cost.
2 The salvage value of normal loss will be excluded from process cost account, and open
goods and transferred that salvage value in it. This procedure will be made regularly an
are in large quantity then it will be sold for cash.
In this case there may be gain or loss on sale of spoiled goods if it is not sold simultenetransferred to Profit and loss account.
3 The cost value on normal loss is not assigned because it is transferred to good output.
The Salvage value of normal loss is assigned, which reduces the process cost.
Required no.5: Abnormal loss with Salvage value
a) Calculate the salvage value of normal loss
Salvage value of normal loss = Nos. of units lost x scrape value
2,000 units x Rs. 5
Rs. 10,000
b) Calculate cost per unit
Cost per unit = (Cost of input - Salvage value of normal loss) / Nos. of Expected outp
= Rs. 120,000 - Rs. 10,000 / 10,000 units
= Rs. 11 per unit
c) Cost of Abnormal loss
= units of abnormal loss x cost per unit
= 1,000 units x 11
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= Rs. 11,000
Process Cost Account
Units Rate Cost Units
Input 12,000 10 120,000 Output 9,000
Normal loss 2,000
(salvage value)
Abnormal loss 1,000
(cost of abnormal loss)
12,000 120,000 12,000
Abnormal loss Account
Units Rate Cost Units
Process cost accou 1,000 11 11,000 Cash 1,000
Profit & loss account
1,000 11,000 1,000
Spoiled goods (Normal loss) Account
Units Rate Cost Units
Process cost accou 2,000 10,000 Cash 2,000
2,000 10,000 2,000
NORMAL LOSS:
1 In Process account, there is no cost value of normal loss because the cost of normal lo
Goods output.
2 In Process account, there is a Salvage of normal loss because this value will be recove
of normal loss which reduces the process cost account.
ABNORMAL LOSS:
3 In Process account, there is a Cost value of abnormal loss is taken, which is equal to c
4 Separate Abnormal loss account will be prepared, taking cost value from process and c
be credited. The balance is called Loss on sale of abnormal loss which will be transferr
Profit and loss account
5 Separate Normal loss (Spoiled goods) account will be prepared in same manner.
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ENTRIES
For Input and Output:
Same entries
For transfer of goods to Spoiled goods (Normal Loss) On Sale of
Cash
Spoiled goods Debit Profit & Los
Process account Credit Profit & L
Spoiled
Gain / loss c
For transfer of goods to Abnormal Loss:
On Sale of
Abnormal loss acco Debit Cash
Process account Credit Profit & LosAbnorm
Only loss wil
loss units b/
Required no.6: Abnormal Gain with NO Salvage value
a) Calculate the cost per unit
Cost per unit = Cost of input / Nos. of expected output units (input units - normal loss un
= Rs. 120,000 / 10,000 units
= Rs. 12
b) Calculate the cost of abnormal gain unit:
Cost of abnormal gain units = 1,000 units x Rs. 12
= Rs. 12,000
c) Prepare Process cost account:
Process Cost Account
Units Rate Cost Units
Input 12,000 10 120,000 Output 11,000
Abnormal Gain 1,000 12 12,000 Normal loss 2,000
13,000 132,000 13,000
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Abnormal Gain Account
Units Rate Cost Units
Profit & loss accoun 1,000 12,000 Process account 1,000
1,000 12,000 1,000
1 Cost of abnormal gain is also equal to cost of output.
2 Cost of abnormal gain is transferred to Profit and loss as a gain, if no salvage va
Accounting Entries
Process account 12,000
Abnormal Gain 12,000
Abnormal gain 12,000
Profit & loss 12,000
Required no.7: Abnormal Gain with Salvage value
a) Salvage value of normal loss:
Salvage value of normal loss = Nos. of normal loss unit x salvage value per unit
= 2,000 units x Rs 5
= Rs 10,000
b) Cost per unit:
Cost per unit = (Cost of input - Salvage value of normal loss) / Nos. of Expected o
= Rs. 120,000 - 10,000 / 10,000 units
= Rs. 110,000 / 10,000 units
= Rs. 11
c) Process Cost Account
Units Rate Cost Units
Input 12,000 10 120,000 Output 11,000
Abnormal Gain 1,000 11 11,000 Normal loss 2,000
13,000 131,000 13,000
Abnormal Gain Account
units Cost units
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P&L account 1,000 11 11,000 Process account 1,000
1,000 11,000 1,000
Normal Loss Accountunits Cost units
Process Account 2,000 5 10,000 Cash 1,000
P&L Account 1,000
2,000 10,000 2,000
P&L Account
units Cost units
Normal Loss 1,000 5,000 Abnormal Gain 1,000
Net Profit 6,000
1,000 11,000 1,000
Accounting Entries
Process account 11,000
Abnormal Gain 11,000
Abnormal gain 11,000
Profit & loss 6,000
Spoiled goods 5,000
Spoiled goods (Nor 10,000
Process account 10,000
b) Sale of normal loss
Cash 5,000
Abnormal gain 5,000
Spoiled goods (Normal loss) 10,000
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Scrap value
of spoiled
output/ unit
-
-
-
5
5
-
5
Rate Cost
10 120,000
120,000
no loss in
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Rate Cost
12 120,000
-
120,000
ss)
d are
t, which
Credit
no value of
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Rate Cost
12.00 108,000
-
12 12,000
120,000
loss)
Rate Cost
12 12,000
12,000
ollable loss.
ting year.
t
Credit
s output.
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Credit
Rate Cost
11 110,000
5 10,000
120,000
utput units
Rate Cost
5 10,000
10,000
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a new account of spoiled
d when the spoiled goods
ously, which will be
t units incl. abnormal lost unit
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Rate Cost
11 99,000
5 10,000
11 11,000
120,000
Rate Cost
5 5,000
6,000
11,000
Rate Cost
10,000
10,000
s is transferred to
ed from sale
ost of output
ash value will
d to
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poiled goods:
Debit
a/c (Loss) Debit
oss a/c (Gain) Credit
oods Credit
an be happened in spoiled goods
bnormal Loss unit
Debit
a/c (Loss) Debitl Loss Credit
ll be happened in sale of abnormal
c salvage value is less cost value
it).
Rate Cost
12 132,000
-
132,000
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Rate Cost
12,000
12,000
lue.
utput units
Rate Cost
11 121,000
5 10,000
131,000
Cost
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11 11,000
11,000
Cost
5 5,000
5,000
10,000
Cost
11 11,000
11,000
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Solution of Example no. 5.2 on Page # 142
Process A account
Units Rate Cost Units
Input 14,000 Output 10,000
Cost incurred:
Material 210,000
Conversion 144,000 Balance c/d 4,000
14,000 354,000 14,000
FOR PROCESS A:Calculation of cost of work in process at end and cost of output:
2 Cost of Work in Process (at end):
Nos of units in process (at end) 4,000
Stage of completion 50% Conversion
Material cost: (4,000 units x 100% x 15) 60,000
Conversion cost: (4,000 units x 50% x 12) 24,000
COST OF WORK IN PROCESS 84,000
1 Equivalent Production units: 3 Cost of Finished goods:
Material Conversion Cost of finished goods:
(10,000 units x 100% x 27)
Units completed 10,000 10,000
add: WIP (at end) - 50% 4,000 2,000
EPU 14,000 12,000
Cost incurred 210,000 144,000
Per unit cost 15.00 12.00
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Process B account
Units Rate Cost Units
Units received 10,000 27 270,000 Output 9,000
Cost incurred:
Material 108,000
Conversion 171,000 Balance c/d 1,000
10,000 549,000 10,000
FOR PROCESS B:
Calculation of cost of work in process at end and cost of output:
3 Cost of Work in Process:
Nos of units in process (at end) 1,000
Stage of completion 50% conversion
Inventory cost (1,000 units x 27) 27,000
Material cost: (1,000 units x 0% x 12) -Conversion cost: (1,000 units x 50% x 18) 9,000
COST OF WORK IN PROCESS 36,000
1 Equivalent Production units: 4 Cost of Finished goods:
Material Conversion Cost of finished goods:
(9,000 units x 100% x 57)
Units completed 9,000 9,000
add: WIP (at end) - 50% - 500
EPU 9,000 9,500
2 Per unit cost:
Cost Units Rate
Cost received from 270,000 10,000 27
Process A
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Cost incured in Process B
Material 108,000 9,000 12
Conversion 171,000 9,500 18
549,000 57
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Rate Cost
27 270,000
84,000
354,000
270,000
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Rate Cost
57 513,000
36,000
549,000
513,000
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Solution of Example 5.3: WEIGHTED AVERAGE METHOD
Process X account
Units Rate Cost Units
Balance b/f 6,000 117,900
Input 16,000 Output 18,000
Cost incurred:
Material 192,000
Conversion 225,000 Balance c/d 4,000
22,000 534,900 22,000
Calculation of Equivalent Production Units:Material Conversion
Units completed and transferred out 18,000 18,000
Add: Units in process (at end) 4,000 3,000
EPU 22,000 21,000
Calculation of per unit cost:
Cost Units Rate
Material cost incurred:On work in process at start 72,000
During current period 192,000 EPU
Total material 264,000 22,000 12.00
Conversion cost incurred:
On work in process at start 45,900
During current period 225,000 EPU
Total Conversion 270,900 21,000 12.90
TOTAL PER UNIT COST 24.90
Cost of Work in Process (at end)
Material cost (4,000 units x 100% x 12) 48,000
Conversion cost (4,000 units x 3/4 x12.90) 38,700
Cost of Work in Process (at end) 86,700
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Cost of Finished goods:
Cost of finished goods (18,000 units x 100% x 24.90) 448,200
Process Y account
Units Rate Cost Units
Balance b/f 2,000 142,200
Transferred in 18,000 24.90 448,200 Output 12,000
Cost incurred:
Material 60,000
Conversion 259,200 Balance c/d 8,000
20,000 909,600 20,000
Calculation of Equivalent Production Units:Material Conversion
Units completed and transferred out 12,000 12,000
Add: Units in process (at end) - 4,000
EPU 12,000 16,000
Calculation of per unit cost:
Cost Units Rate
Per unit cost from Process X:
Units received from previous dept 448,200 18,000
Cost incured on Work in process (at start) 91,800 2,000
TOTAL 540,000 20,000 27.00
Material cost incurred:
On work in process at start 12,000
During current period 60,000 EPU
Total material 72,000 12,000 6.00
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Conversion cost incurred:
On work in process at start 38,400
During current period 259,200 EPU
Total Conversion 297,600 16,000 18.60
TOTAL PER UNIT COST 51.60
Cost of Work in Process (at end)
Inventory cost (8,000 units x 27) 216,000
Material cost (8,000 units x 0% x 6) -
Conversion cost (8,000 units x 1/2 x 18.6) 74,400
Cost of Work in Process (at end) 290,400
Cost of Finished goods:
Cost of finished goods (12,000 units x 100% x 51.60) 619,200
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Rate Cost
24.90 448,200
86,700
534,900
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Rate Cost
51.60 619,200
290,400
909,600
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Solution of Example 5.3: FIFO
Process X account
Units Rate Cost Units
Balance b/f 6,000 117,900
Input 16,000 Output 18,000
Cost incurred:
Material 192,000
Conversion 225,000 Balance c/d 4,000
22,000 534,900 22,000
Calculation of Equivalent Production Units:
Material ConversionUnits completed and transferred out 18,000 18,000
Less: Work in Process (at start) (6,000) (6,000)
Units started and completed during the period 12,000 12,000
Add: Work in process (at start) - work this period - 2,400
Add: Work in process (at end) - work this period 4,000 3,000
EPU 16,000 17,400
Calculation of per unit cost:
Cost Units Rate
Material cost incurred: 192,000 16,000 12.00
Conversion cost incurred: 225,000 17,400 12.93
TOTAL PER UNIT COST 24.931
Cost of Work in Process (at end)
Material cost (4,000 units x 100% x 12) 48,000
Conversion cost (4,000 units x 3/4 x12.90) 38,793
Cost of Work in Process (at end) 86,793
Cost of Finished goods:
a) From beginning inventory (6,000 units)
Cost incured till start upto 60% processed 117,900
add: Further cost incurred to complete 100%:
Material (6,000 units x 0% x 12) -
Conversion (6,000 units x 40% x 12.93) 31,032 31,032
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Per unit cost from Process X:
Cost transferred in 448,107 18,000 24.89
Material cost incurred:
During current period 60,000 10,000 6.00
Conversion cost incurred:
During current period 259,200 14,400 18.00
TOTAL PER UNIT COST 48.89
Cost of Work in Process (at end)
Inventory cost (8,000 units x 24.89) 199,120
Material cost (8,000 units x 0% x 6) -
Conversion cost (8,000 units x 1/2 x 18) 72,000
Cost of Work in Process (at end) 271,120
Cost of Finished goods:
a) From beginning inventory (2,000 units)
Cost incured till start of the period 142,200
add: Further cost incured to complete 100%:
Material cost (2,000 units x 0% x 6) -
Conversion cost (2,000 units x 20% x 18) 7,200 7,200Total cost incured on 2,000 units 149,400
b) From current Production (10,000 units)
Cost incurred (10,000 units x 100% x 48.89) 488,900
TOTAL COST OF FINISHED GOODS 638,300
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Rate Cost
24.931 448,107
86,793
534,900
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148,932
299,160
448,107
Rate Cost
53.20 638,387
271,120
909,507
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WIP (at start) Nil
Units put into process 1,000
units completed 600
WIP (at end) - 50% completed 300
units lost (normall) 100
lost at endMaterial cost 5,000
Conversion cost 3,400
Process account
Units Rate Cost Units
Balance b/f - -
Input 1,000 Output 600
Cost incurred: Normal loss 100
Material 5,000
Conversion 3,400 Balance c/d 300
1,000 8,400 1,000
Calculation of Equivalent Production Units:
Material Conversion
Units completed and transferred out 600 600
Add: Work in process (at end) - work this period 300 150
Add: Unit lost 100 100
EPU 1,000 850
Calculation of per unit cost:
Cost Units Rate
Material cost incurred: 5,000 1,000 5.00
Conversion cost incurred: 3,400 850 4.00
TOTAL PER UNIT COST 9.00Cost of Work in Process (at end)
Material cost (300 units x 100% x 5) 1,500
Conversion cost (300 units x 50% x 4) 600
Cost of Work in Process (at end) 2,100
Cost of Finished goods:
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From Current Production (600 units)
Cost incurred (600 units x 100% x 9)
Add: Cost of normal loss (100 units x 9)
COST OF FINISHED GOODS
Short Cut Approach: - Unit lost (Normal) is NOT taken in EPU:
Process account
Units Rate Cost Units
Balance b/f - -
Input 1,000 Output 600
Cost incurred: Normal loss 100
Material 5,000
Conversion 3,400 Balance c/d 300
1,000 8,400 1,000
Calculation of Equivalent Production Units:
Material ConversionUnits completed and transferred out 600 600
Add: Work in process (at end) - work this period 300 150
EPU 900 750
Calculation of per unit cost:
Cost Units Rate
Material cost incurred: 5,000 900 5.56
Conversion cost incurred: 3,400 750 4.53
TOTAL PER UNIT COST 10.09
Cost of Work in Process (at end)
Material cost (300 units x 100% x 5.56) 1,668
Conversion cost (300 units x 50% x 4) 681
Cost of Work in Process (at end) 2,349
Cost of Finished goods:
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From Current Production (600 units)
Cost incurred (600 units x 100% x 1.09)
COST OF FINISHED GOODS
CASE I
Input 1000 units are processed upto 50% which is the inspection point. At this level 100 are declared
loss and the expected good output become 900 units. Therefore the cost of normal loss which is 712
to 900 units. At the end of month out of 900 expected good output is converted in to 600 finished go
300 w.i.p
Calculation of Equivalent Production Units:
Material Conversion
Units completed and transferred out 600 600Add: Work in process (at end) - work this period 300 150
Add: Unit lost 100 50
EPU 1,000 800
Calculation of per unit cost:
Cost Units Rate
Material cost incurred: 5,000 1,000 5.00
Conversion cost incurred: 3,400 800 4.25
TOTAL PER UNIT COST 9.25
Cost of normal loss:
Cost of material (100 units x 100% x 5) 500
Cost of conversion (100 units 50% x 4.25) 212.50
712.50
Cost of normal loss on good units (per unit)
Cost of normal loss / Expected good output
712.50 0.7917
900
WIP (at end) = 300 units x 0.79 = 237.50
Finished goods =600 units x 0.79 = 475.00
712.50
Calculation of Cost of Finished goods
600 units x 9.25 5,550
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Add: Share of normal loss 475
6,025
Cost of Ending WIP:
Material cost (300 units x 100% x 5) 1,500
Conversion cost (300 units x 50% x 4.25) 638Add: Share of normal loss 238
Cost of Work in Process (at end) 2,375
Process account
Units Rate Cost Units
Balance b/f - -
Input 1,000 Output 600
Cost incurred: Normal loss 100
Material 5,000
Conversion 3,400 Balance c/d 300
1,000 8,400 1,000
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Rate Cost
10.50 6,300
-
2,100
8,400
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5,400
900
6,300
Rate Cost
10.09 6,054
-
2,349
8,403
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6,054
6,054
as a
.50 is transfer
d and
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Rate Cost
10.04 6,025
-
2,375
8,400
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Solution of 5 A -2
WIP (at start) Nil
Units put into process 1,000
units completed 600
WIP (at end) - 20% completed 250Normal loss 100
Abnormal loss 50
lost at end
Material cost 8,000
Conversion cost 4,000
Process account
Units Rate Cost Units
Balance b/f - - Output 600
Input 1,000 Normal loss 100
Cost incurred: Abnormal loss 50
Material 8,000
Conversion 4,000 Balance c/d 250
1,000 12,000 1,000
Abnormal loss account
Units Rate Cost Units
Process account 50 13 650 P & L 50
50 13 650 50
Calculation of Equivalent Production Units:
Material Conversion
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Units completed and transferred out 600 600
Add: Work in process (at end) - work this period 250 50
Add: Abnormal loss 50 50
Add: Unit lost 100 100
EPU 1,000 800
Calculation of per unit cost:
Cost Units Rate
Material cost incurred: 8,000 1,000 8.00
Conversion cost incurred: 4,000 800 5.00
TOTAL PER UNIT COST 13.00
Cost of Work in Process (at end)
Material cost (250 units x 100% x 8) 2,000
Conversion cost (250 units x 20% x 5) 250
Cost of Work in Process (at end) 2,250
Cost of Finished goods:
From Current Production (600 units)
Cost incurred (600 units x 100% x 13)
Add: Cost of normal loss (100 units x 13)
COST OF FINISHED GOODS
Cost of Abnormal Loss:
50 units x 13 650
Allocation of Cost of normal loss to Output and on abnormal loss (Expected good Output) - a
When the amount of normal loss is significant, then the cost is transferred to expected good output(
Process account
Units Rate Cost Units
Balance b/f - - Output 600
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Input 1,000 Normal loss 100
Cost incurred: Abnormal loss 50
Material 8,000
Conversion 4,000 Balance c/d 250
1,000 12,000 1,000
Abnormal loss account
Units Rate Cost Units
Process account 50 15 750 P & L 50
50 15 750 50
Calculation of Equivalent Production Units:
Material Conversion
Units completed and transferred out 600 600
Add: Work in process (at end) - work this period 250 50
Add: Abnormal loss 50 50
Add: Unit lost 100 100
EPU 1,000 800
Calculation of per unit cost:
Cost Units Rate
Material cost incurred: 8,000 1,000 8.00
Conversion cost incurred: 4,000 800 5.00
TOTAL PER UNIT COST 13.00
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Cost of Work in Process (at end)
Material cost (250 units x 100% x 8) 2,000
Conversion cost (250 units x 20% x 5) 250
Cost of Work in Process (at end) 2,250
Cost of normal loss per unit:
Amount of normal loss 1,300 2.00
Expected good output 650
Cost of normal charged to Finished goods (600 units x 2) 1,200
Cost of normal loss charged to abnormal loss (50 units x 2) 100
Cost of Finished goods:
From Current Production (600 units)
Cost incurred (600 units x 100% x 13)
Add: Cost of normal loss
COST OF FINISHED GOODS
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CASE I
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Input 1000 units are processed upto 50% which is the inspection point. At this level 100 are declared
loss and the expected good output become 900 units. Therefore the cost of normal loss which is 712
to 900 units. At the end of month out of 900 expected good output is converted in to 600 finished go
300 w.i.p
Calculation of Equivalent Production Units:
Material Conversion
Units completed and transferred out 600 600
Add: Work in process (at end) - work this period 300 150
Add: Unit lost 100 50
EPU 1,000 800
Calculation of per unit cost:
Cost Units Rate
Material cost incurred: 5,000 1,000 5.00
Conversion cost incurred: 3,400 800 4.25
TOTAL PER UNIT COST 9.25
Cost of normal loss:
Cost of material (100 units x 100% x 5) 500
Cost of conversion (100 units 50% x 4.25) 212.50
712.50
Cost of normal loss on good units (per unit)
Cost of normal loss / Expected good output
712.50 0.7917
900
WIP (at end) = 300 units x 0.79 = 237.50
Finished goods =600 units x 0.79 = 475.00
712.50
Calculation of Cost of Finished goods
600 units x 9.25 5,550
Add: Share of normal loss 475
6,025
Cost of Ending WIP:
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Material cost (300 units x 100% x 5) 1,500
Conversion cost (300 units x 50% x 4.25) 638
Add: Share of normal loss 238
Cost of Work in Process (at end) 2,375
Process account
Units Rate Cost Units
Balance b/f - -
Input 1,000 Output 600
Cost incurred: Normal loss 100
Material 5,000
Conversion 3,400 Balance c/d 300
1,000 8,400 1,000
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Rate Cost
15.17 9,100
- -
13.00 650
2,250
12,000
Rate Cost
13 650
13 650
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7,800
1,300
9,100
s per Example 5.1
Finished + Abnormal)
Rate Cost
15.00 9,000
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- -
15.00 750
2,250
12,000
Rate Cost
15 750
15 750
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7,800
1,200
9,000
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as a
.50 is transfer
d and
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Rate Cost
10.04 6,025
-
2,375
8,400
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Pb 5.27 (5th edition) & 5.35 (6th Edition)
1 At specific level material is added whereas conversion is added uniformly.
2 Inspection at the end of process
3 upto 10% of good output is consider to be normal loss.
4 Reworked- 500 rolls
5 Rework cost is charged to Process overhead. (FIFO)
6 Dyeing dept
1000 units ( Rs. 12000 D/M and 4620 direct labor)
all material added and 60% D/L is incured
During the month 5650 rolls were started and 500 rolls are reworked
Reworked cost is 60% material and 50% direct labor
7 Spoiled goods 550 rolls
8 WIP at end 800 rolls 80% material and 40% direct labor
9 Direct material cost incured 72085 and direct labor 11718
10 FOH 3.5 per direct labor cost
11 Actual FOH is 34110 (excluding reworked cost)
Solution
Unit in process (start) 1,000
Add: Unit placed in production 5,650
Total 6,650
Add: Re-work units 500
Total 7,150
Less: WIP (at end) (800)
Less: Spoiled units (550)
Units finished during the period 5,800
Total 5,800 rolls are completed during the year including 500 rolls reworked.
Therefore 5,300 rolls are un-reworked rolls. (i.e 5,800 rolls - 500 rolls). These
rolls are good output and the normal loss is calculated on these rolls.
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Normal Loss (5,300 rolls x 10%) 530 rolls
Abnormal loss (550 rolls - 530 rolls) 20 rolls.
Material ConversionTotal units completed 5,800 5,800
Less: Re-worked units (500) (500)
Less: Units in process (at start) (1,000) (1,000)
Units compeleted and transferred out 4,300 4,300
add: Re-worked units - work this period 300 250
add: units in process (at start) - work this period - 400
add: units in process (at end) - work this period 640 320
TOTAL 5,240 5,270
add: Normal loss - at the end of process 530 530
add: Abnormal loss - at the end of process 20 20
EQUIVALENT PRODUCTION UNITS 5,790 5,820
Cost Units Rate
Material 72,085 5,790 12.4499
Labor 11,718 5,820 2.0134
Factory overhead (350%) 41,013 5,820 7.0469
124,816 21.5102
Req Allocation of Cost to:
a) Cost of good output (Excluding re-work cost) - 5,300 units:
i) From Beginning Inventory (1,000 units): (12000 DM + 4620 DL + 1
Cost incured till start of the period
add: Cost incurred to complete 100%:
Material (1,000 units x 0% x 12.4499) -
Labor (1,000 units x 40% x 2.0134) 805.36
FoH (1,000 units x 40% x 7.0469) 2,818.76
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Process Account
Units Cost Units Cost
Bal b/d 1,000 32,790 Completed units 5,800 146,308
Reworked 500 -
Started 5,650 Normal Loss 530 -
Material 72,085 Abnormal Loss 20 430
Labor 11,718
FOH (Applied) 41,013 Bal c/d 800 10,867
7,150 157,606 7,150 157,605
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6170 FOH (4620 x 3.5)
32,790
3,624.12
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36,414
92,494
128,908
3,737.97
503.35
1,761.72
6,000.0
11,400
430
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Solution of Ex- 7 (Chapter 6) M&U
Department B
Units Rate Cost
Unit received 12,000 7.00 84,000 Output
Normal loss
Cost incurred: Abnormal Loss
Material 18,000
Conversion 45,600 Balance c/d
12,000 147,600
Department B
Units Rate Cost
Unit received 12,000 7.00 84,000 Output
Normal loss
Cost incurred: Abnormal Loss
Material 18,000
Conversion 45,600 Balance c/d
12,000 147,600
Abnormal Loss account
Units Rate Cost
Unit received 550 11.00 6,050 P & L / FOH
550 6,050
Calculation of Equivalent Production Units:
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Material
Units completed and transferred out 9,000
Add: Work in process (at end) - work this period -
Add: Normal Loss - due to inspection at end -
Add: Abnormal Loss - due to inspection at end -
EPU 9,000
Calculation of per unit cost:
Cost Units
1. Per unit cost from Previous dept 84,000 12,000
Material cost incurred: 18,000 9,000
Conversion cost incurred: 45,600 11,400
TOTAL PER UNIT COST
Cost of Work in Process (at end)
Inventory Cost (2,000 units x 7) 14,000
Material cost (2,000 units x 0% x 2) -
Conversion cost (2,000 units x 70% x 4) 5,600
Cost of Work in Process (at end) 19,600
Cost of Finished goods:
Cost incurred (9,000 units x 100% x 13)
COST OF FINISHED GOODS
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Units Rate Cost
9,000 13 117,000
450 11 4,950 Cost is assigned b/c inspection at end
550 11 6,050 Cost is assigned b/c inspection at end
2,000 19,600
12,000 147,600
Units Rate Cost
9,000 13.55 121,950
450
550 11 6,050
2,000 19,600
12,000 147,600
Units Rate Cost
550 11 6,050
550 6,050
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Solution of Pb 7-2
WEIGHTED AVERAGE METHOD
Department A
Units Rate Cost
Balance b/f 3,000 2,647 Output- Transferred out
Input 61,000 - On hand
Cost incurred: Unit lost - Normal loss
Material 12,481
Direct Labor 16,273 Balance c/d
FOH 18,409
64,000 49,810
Calculation of Equivalent Production Units:
Material
Units completed and transferred out 50,000
Units completed but not transferred, on hand 5,000
Add: Units in process (at end) 8,000
EPU 63,000
Calculation of per unit cost:
Cost Units
Material cost incurred:
On work in process at start 749
During current period 12,481 EPU
Total material 13,230 63,000
Direct Labor used
On work in process at start 837
During current period 16,273 EPU
Total Conversion 17,110 59,000
Conversion cost incurred:
On work in process at start 1,061
During current period 18,409 EPU
Total Conversion 19,470 59,000
TOTAL PER UNIT COST
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Cost of Work in Process (at end)
Material cost (8,000 units x 100% x 0.21) 1,680
Direct labor cost (8,000 units x 50% x 0.29) 1,160
FOH (8,000 units x 50% x 0.33) 1,320
Cost of Work in Process (at end) 4,160
Cost of Finished goods:
1 Units completed and transferred out
(50,000 units x 100% x 0.83)
2 Units completed and on hand
(5,000 units x 100% x 0.83)
Note: Cost of Normal Loss - is added in Finished goods but in this units are lost at the start
of process, therefore at start work done on it in respect of material, labor and FOH
Process Y account
Units Rate Cost
Balance b/f 2,000 2,564
Transferred in 50,000 0.83 41,500 Output
Cost incurred: Unit lost -Normal loss
Material 3,092
Direct labor 4,045
FOH 4,579 Balance c/d
52,000 55,780
Calculation of Equivalent Production Units:
Material
Units completed and transferred out 45,000
Add: Units in process (at end) 5,000
EPU 50,000
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Calculation of per unit cost:
Cost Units
Per unit cost from Process X:
Units received from previous dept 41,500 50,000
Cost incured on Work in process (at start) 1,600 2,000TOTAL 43,100 52,000
Material cost incurred:
On work in process at start 158
During current period 3,092 EPU
Total material 3,250 50,000
Direct labor
On work in process at start 325
During current period 4,045 EPU
Total material 4,370 46,000
FOH incurred
On work in process at start 481
During current period 4,579 EPU
Total Conversion 5,060 46,000
TOTAL PER UNIT COST
Cost of Work in Process (at end)
Inventory cost (5,000 units x 0.83) 4,150
Material cost (5,000 units x 100% x 0.07) 350
Direct labor cost (5,000 units x 20% x 0.10) 100
FOH Cost (5,000 units x 20% x 0.11) 110
Cost of Work in Process (at end) 4,710
Cost of Finished goods:
(45,000 units x 100% x 1.10)
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41,500
4,150
45,650
Units Rate Cost
45,000 1.10 49,500
2,000
5,000 4,710
52,000 54,2101,570
Conversion
45,000
1,000
46,000
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Rate
0.83
0.07
0.10
0.11
1.10
49,500