Chapter 9 - Process Costing & Operation Costing FT

Process Costing & Operation Costing FT

Question 1 - May 08, Rtp (Similar)
JK Ltd produces a Product AZE, which passes through two processes, viz, Process I and Process II. The output
of each process is treated as the Raw Material of the next process to which it is transferred and output of the
Process II is transferred to finished stock. The following data related to December:
Particulars Process I Process II

25,000 units introduced at a cost of 2,00,000 -

Material Consumed 1,92,000 96,020
Direct Labour 2,24,000 1,28,000
Manufacturing Expenses 1,40,000 60,000
Normal Wastage of Input 10% 10%
Scrap Value of Normal Wastage (per unit) 9.90 8.60
Output in Units 22,000 20,000
Prepare – (a) Process I and Process II A/c, and (b) Abnormal Loss/Gain Account as the case May be, for each
process.

Process Account and Journal Entries to show the Loss of Spoilt units
Question 2 -
Fifty units are introduced into a process at a cost of 50. The total additional expenditure incurred by the
process is 32. Of the units introduced 10 per cent are normally spoiled in the cou₹e of manufacture; these
possess a scrap value of Re. 0.20 each. Owing to an accident only 40 units are produced.
You are required to:
(i) Prepare a Process Account and
(ii) Give journal entries to show how the loss arising out of spoilt units should be treated.

More than One Process and Computation of Selling Price

Question 3 - Nov 02
A product passes through two processes. The output of Process I becomes the input for Process II and the
output of Process II is transferred to the Warehouse. The quantity of Raw Materials introduced into Process I
is 20,000 kg at 10 per kg. The cost and output data for the month under review are as below:
Particulars Process I Process II
Direct Materials 60,000 40,000
Direct Labour 40,000 30,000
Production Overheads 39,000 40,250
Normal Loss 8% 5%
Output 18,000 kg 17,400 kg
Loss realisation per unit 2.00 3.00
The Company’s policy is to fix the Selling Price of the end product in such a way as to yield a profit of 20% on
Selling Price. You are required to –
1. Prepare the Process Accounts
2. Determine the Selling Price per unit of the end product.

Process A/c with Process Stock A/c

WAC Method of Stock Valuation
Question 4 - Rtp
The product manufacture by Alkali Ltd passes through three processes I, II and III. The following costs have
been incurred for the month of April.
Details Process I Process II Process III
Material Consumed 40,000 15,000 10,000
Direct Wages 45,000 20,000 20,000
Direct Expenses 41,000 4,500 5,010
Total 1,26,000 39,500 35,010
Output (units) 3,900 3,850 3,200

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 Chapter 9 - Process Costing & Operation Costing FT

Finished Process Stock (units)

(1) 1st April 600 550 800
th
(2) 30 April 500 800 Nil
Stock Valuation on 1st April ( per
unit) 49 62 74
Percentage of Wastage 2% 5% 10%
Net Realisable Value of wastage per
unit 27 32.50 42.00
4,000 units of Raw Materials were introduced in Process I at a cost of 80,000. Stocks are valued and
transferred to subsequent process at Weighted Average Cost. The percentage of wastage is computed on the
number of units entering the process concerned. Prepare –
(i) Process Accounts and Process Stock Accounts
(ii) Normal Wastage Account
(iii) Abnormal Wastage/Effective Gain Account.

Question 5 - July 2021

A manufacturing unit manufactures a product ‘XYZ’ which passes through three distinct Processes – X, Y and
Z. The following data is given :
Process - X Process - Y Process - Z
Material consumed (in ₹) 2,600 2,250 2,000
Direct Wages (in ₹) 4,000 3,500 3,000
● The total production overhead of ₹ 15,750 was recovered @ 150% of Direct Wages.
● 15,000 units at ₹ 2 each were introduced to Process ‘X’.
● The output of each process passes to the next process and finally, 12,000 units were transferred to
Finished Stock Account from Process ‘Z’.
● No stock of materials or work in progress was left at the end.
The following additional information is given :
Process % of wastage to normal input Value of Scrap per unit (₹)
X 6% 1.10
Y ? 2.00
Z 5% 1.00

You are required to :

(i) Find out the percentage of wastage in Process ‘Y’ , given that the output of Process ‘Y’ is transferred to
Process ‘Y’ is transferred to Process ‘Z’ at ₹ 4 per unit.
(ii) Prepare Process accounts for all the three processes X , Y ,and Z.

Question 6 - Nov 2022

N Ltd. produces a product which passes through two processes – Process – I and Process-II. The company
has provided following information related to the Financial Year 2021-22:
Process-I Process -II
Raw Material @₹. 65 per unit 6,500 units -
Direct Wages ₹. 1,40,000 ₹. 1,30,000
Direct Expenses 30% of Direct Wages 35% of Direct Wages
Manufacturing Overheads ₹. 21,500 ₹. 24,500
Realisable value of scrap per unit ₹. 4.00 ₹. 16.00
Normal Loss 250 units 500 units
Units transferred to Process-II / finished stock 6,000 units 5,500 units
Sales - 5,000 units
There was no opening or closing stock of work-in progress.
You are required to prepare:
1. Process-I Account
2. Process -II Account
3. Finished Stock Account

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 Chapter 9 - Process Costing & Operation Costing FT

Inter Process Transfer and Profit

Mark up on Opening Stock- Stock Valuation at Prime Cost
Question 7 - Nov 08, May 2017
A Product passes through three Processes ‘X’, ‘Y’, ‘Z’. The output of Process ‘X’ and ‘Y’ is transferred to next
Process at Cost plus 20% each on Transfer Price and the output of Process Z is transferred to Finished Stock
at a profit of 25% on Transfer Price.
The following information is available in respect of the year ending 31st March:
Particulars Process X Process Y Process Z Finished Stock
Opening Stock 15,000 27,000 40,000 45,000
Material Stock 80,000 65,000 50,000 -
Wages 1,25,000 1,08,000 92,000 -
Manufacturing Overheads 96,000 72,000 66,500 -
Closing Stock 20,000 32,000 39,000 50,000
Inter-Process Profit included in
Opening Stock Nil 4,000 10,000 20,000
Stock in Process is valued at Prime Cost. Finished Stock is valued at the price at which it is received from
Process ‘Z’. Sales of the Finished Stock during the period was 14,00,000.
Required:
(a) Prepare Process Accounts and Finished Stock Account showing profit element at each stage.
(b) Show the Profit and Loss Account.
(c) Show the relevant items in the Balance Sheet.

Inter Process Profits – Valuation at Prime Cost

Question 8 - Study Material, May 10
Pharma Limited produces product ‘Glucodin’ which passes through two processes before it is completed and
transferred to Finished Stock. The following data relates to March –
Particulars Process – I Process – II Finished Stock
Opening Stock 1,50,000 1,80,000 4,50,000
Direct Materials 3,00,000 3,15,000 -
Direct Wages 2,24,000 2,25,000 -
Factory Overheads 2,10,000 90,000 -
Closing Stock 74,000 90,000 2,25,000
Inter Process Profit included in
Opening Stock Nil 30,000 1,65,000
Output of Process I is transferred to Process II at 25% Profit on the transferred price, whereas output of
Process II is Finished Stock at 20% on Transfer Price. Stock-in-Process are valued at Prime Cost. Finished
Stock is valued at the price at which it is received from Process II. Sales for the month is 28,00,000.
You are required to prepare Process-I Account, Process-II Account, and Finished Stock Account, showing the
profit element at each stage.

Purifying Process A/c and Royalty Payable A/c

Question 9 - May 96
The product manufacture by Alkali Ltd passes through three processes I, II and III. The following costs have
been incurred for the month of April.
Details Process I Process II Process III
Material Consumed 40,000 15,000 10,000
Direct Wages 45,000 20,000 20,000
Direct Expenses 41,000 4,500 5,010
Total 1,26,000 39,500 35,010
Output (units) 3,900 3,850 3,200
Finished Process Stock (units)
(1) 1st April 600 550 800
(2) 30th April 500 800 Nil
st
Stock Valuation on 1 April ( per
unit) 49 62 74

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 Chapter 9 - Process Costing & Operation Costing FT

Percentage of Wastage 2% 5% 10%

Net Realisable Value of wastage
per unit 27 32.50 42.00
4,000 units of Raw Materials were introduced in Process I at a cost of 80,000. Stocks are valued and
transferred to subsequent process at Weighted Average Cost. The percentage of wastage is computed on the
number of units entering the process concerned.
Prepare:
(a) Process Accounts and Process Stock Accounts
(b) Normal Wastage Account
(c) Abnormal Wastage/Effective Gain Account.

FIFO – first Process

Question 10 - Rtp, May 90, Nov 2014
The following data are available in respect of a manufacturing concern for a Particulars period –
● Opening Stock of Work-in-Progress: 800 units at a Total Cost of 4,000.
Degree of Completion:
● Materials 100%
● Labour 60%
● Overheads 60%
● Input of Materials at a Total Cost of 36,800 for 9,200 units.
● Direct Wages incurred 16,740.
● Production Overheads 8,370.
● Units scrapped 1,200 units.
Degree of Completion:
Materials 100%
Labour 80%
Overheads 80%
● Closing Work-in-Progress: 900 units.
Degree of Completion:
Materials 100%
Labour 70%
Overheads 70%
● 7,900 units were completed and transferred to the next process.
● Normal Loss is 8% of the Total Input (Opening Stock plus units put in)
● Scrap Value is 4 per unit.
You are required to:
1. Prepare a Statement of Equivalent Production showing the Cost per Equivalent Unit for each element.
2. Compute the cost of units transferred to the next process, Abnormal Loss and Closing Work in Progress
using the FIFO method.
3. Prepare Process Account.

Question 11 - Jan 2021

MNO Ltd has provided following details:
● Opening work in progress is 10,000 units at ₹ 50,000 (Material 100%, Labour and overheads 70%
complete).
● Input of materials is 55,000 units at ₹ 2,20,000. Amount spent on Labour and Overheads is ₹ 26,500
and ₹ 61,500 respectively.
● 9,500 units were scrapped; degree of completion for material 100% and for labour & overheads 60%.
● Closing work in progress is 12,000 units; degree of completion for material 100% and for labour &
overheads 90%.
● Finished units transferred to next process are 43,500 units.
● Normal loss is 5% of total input including opening work in progress. Scrapped units would fetch ₹ 8.50
per unit.
You are required to prepare using FIFO method:
(i) Statement of Equivalent production
(ii) Abnormal Loss Account

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Question 12 - Rtp,Nov 11,Nov 14

The following data are available in respect of Process I for the month of October:
Opening Work-in-Progress 2,250 units at 11,250
Degree of Completion:
Materials 100%
Labour 60%
Overheads 60%
Input of Materials 22,750 units at 88,500
Direct Wages 20,500
Production Overheads 41,000
Units Scrapped 3,000 Units
Degree of Completion:
Materials 100%
Labour 70%
Overheads 70%
Closing Work-in-Progress 2,500 units
Degree of Completion:
Materials 100%
Labour 80%
Overheads 80%
Units transferred to the next process: 19,500 units
Normal Process Loss is 10% of Total Input (Opening Stock plus units put in). Scrap Value is 3.00 per unit. The
Company follows FIFO method of inventory valuation.
You are required to:
1. Prepare Statement of Equivalent Production,
2. Prepare Statement of Cost per Equivalent Unit for each element and Cost of Abnormal Loss, Closing Work in
Progress and units transferred to next process, and
3. Prepare Process Accounts.

FIFO – Subsequent Process

Question 13 - Nov 03
From the following information for the month of October 2003, prepare Process III Cost Accounts.
Opening WIP in Process III 1,800 units at 27,000
Transfer from Process II 47,700 units at 5,36,625
Transferred to Warehouse 43,200 units
Closing WIP of Process III 4,500 units
Units scrapped 1,800 units
Direct Material added in Process III 1,77,840
Direct Wages 87,840
Production Overheads 43,920
Degree of completion
Particulars Opening Stock Closing Stock Scrap
Material 80% 70% 100%
Labour 60% 50% 70%
Overheads 60% 50% 70%
The normal loss in the process was 5% of the production and scrap was sold at 6.75 per unit.

Weighted Average Cost Method (WAC) First Process

Question 14 - Study Material(similar),Nov 07, May 99
ABC Ltd. manufactures a Product ‘ZX’ by using the process namely RT. For the month of May, 2007, the
following data is available:
Particulars Process RT
Material introduced (units) 16,000
Transfer to next process (units) 14,400
Work in Process:
At the beginning of the month (units) (4/5 completed) 4,000

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At the end of the month (units) ( 2/3 completed) 3,000

Cost Records:
Work-in-Process at the beginning of the month
Materials 30,000
conversion Cost 29,200
Cost during the month: Materials 1,20,000
conversion Cost 1,60,800
Normal spoiled units are 10% of goods finished output transferred to next process. Defects in these units are
identified in their finished state. Material for the product is put in the process at the beginning of the cycle of
operation, whereas Labour & other Indirect Cost flow evenly over the year. It has no realizable value for spoiled
units.
Required:
(a) Statement of Equivalent Production (Average Cost Method);
(b) Statement of Cost & Distribution of Cost;
(c) Process Accounts.

Question 15 - Study Material,May 07

Following details are related to the work done in Process ‘A’ of XYZ Company during the month of March,
2007:
Opening Work-in-Progress (2,000 units)
Materials 80,000
Labour 15,000
Overheads 45,000
Materials introduced in Process 'A' (38,000 units) 14,80,000
Direct Labour 3,59,000
Overheads 10,77,000
Units scrapped: 3,000 units
Degree of completion:
Materials 100%
Labour and Overheads 80%
Closing Work-in-Progress: 2,000 units
Degree of completion:
Materials 100%
Labour and Overheads 80%
Units finished and transferred to Process ‘B’: 35,000
Normal Loss: 5% of total input including Opening Work-in-Progress
Scrapped units fetch 20 per piece.
You are required to prepare:
(a) Statement of Equivalent Production ;
(b) Statement of Cost;
(c) Statement of Distribution of Cost; and
(d) Process ‘A’ Account, Normal and Abnormal Loss Accounts.

Question 16 - Study Material

Following information is available regarding Process-I for the month of February, 2020:
Production Record:
Units in process as on 1.2.2020 4,000
(All materials used, 25% complete for labour and overhead)
New units introduced 16,000
Units completed 14,000
Units in process as on 28.2.2020 6,000
(All materials used, 33-1/3% complete for labour and overhead)
Cost Records:
Work-in-process as on 1.2.2020 (₹)
Materials 6,000

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 Chapter 9 - Process Costing & Operation Costing FT

Labour 1,000
Overhead 1,000
8,000
Cost during the month:
Materials 25,600
Labour 15,000
Overhead 15,000
55,600
Presuming that average method of inventory 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-I.

Question 17 - Study Material

‘Healthy Sweets’ is engaged in the manufacturing of jaggery. Its process involve sugarcane crushing for juice
extraction, then filtration and boiling of juice along with some chemicals and then letting it cool to cut
solidified jaggery blocks.
The main process of juice extraction (Process – I) is done in conventional crusher, which is then filtered and
boiled (Process – II) in iron pots. The solidified jaggery blocks are then cut, packed and dispatched. For
manufacturing 10 kg of jaggery, 100 kg of sugarcane is required, which extracts only 45 litre of juice.
Following information regarding Process – I has been obtained from the manufacturing department of Healthy
Sweets for the month of January, 2020:
(₹)
Opening work-in process (4,500 litre)
Sugarcane 50,000
Labour 15,000
Overheads 45,000
Sugarcane introduced for juice extraction (1,00,000 kg) 5,00,000
Direct Labour 2,00,000
Overheads 6,00,000
Abnormal Loss: 1,000 kg
Degree of completion:
Sugarcane 100%
Labour and overheads 80%
Closing work-in process: 9,000 litre
Degree of completion:
Sugarcane 100%
Labour and overheads 80%
Extracted juice transferred for filtering and boiling: 39,500 litre
(Consider mass of 1 litre of juice equivalent to 1 kg)
You are required to PREPARE using average method:
(i) Statement of equivalent production,
(ii) Statement of cost,
(iii) Statement of distribution cost, and
(iv) Process-I Account.

WAC – Subsequent Process

Question 18 - Rtp, May 01, Nov 2015(similar)
The following information is given in respect of Process No. 3 for the month of January, 2001
1. Opening Stock – 2,000 units made-up of:
Direct Materials – I 12,350
Direct Materials – II 13,200
Direct Labour 17,500
Overheads 11,000
2. Transferred from Process No. 2: 20,000 units at 6.00 per unit.
3. Transferred to Process No. 4: 17,000 units
4. Cost uncured in Process No. 3:

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Direct Materials 30,000

Direct Labour 60,000
Overheads 60,000
5. Scrap: 1,000 units – Direct Materials 100%, Direct Labour 60%, Overheads 40%
6. Normal Loss 10% of production. Scrapped units realized 4 per unit.
7. Closing Stock: 4,000 units – Degree of completion: Direct Materials 80%, Direct Labour 60% and Overheads
40%.
Prepare Process No. 3 Account using Average Cost Method, along with necessary supporting statements.

Miscellaneous Problems- Equivalent Production

first and Subsequent Process – Determination of Sale Price
Question 19 - Nov 91
A Company manufactures a product which involves two consecutive processes viz. Pressing & Polishing. For
the month of October, the following information is available:
Particulars Pressing Polishing
Opening Stock - -
Input of units in process 1,200 1,000
Units completed 1,000 500
Units under process at the end
of October 200 500
Materials Cost 96,000 8,000
conversion Cost 3,36,000 54,000
For incomplete units in process, charge Materials Cost at 100% and conversion Cost 60% in Pressing Process
and 50% in Polishing Process. Prepare a statement and calculate the Selling Price per unit which will result in
25% Profit on Sales.

Question 20 - Study Material

A product passes through three processes. The output of each process is treated as raw material of the next
process to which it is transferred and output of the third process is transferred to finished stock.
Particulars Process-I (₹.) Process-II (₹.) Process-III (₹.)
Materials used 40,000 20,000 10,000
Labour 6,000 4,000 1,000
Manufacturing overhead 10,000 10,000 15,000
10,000 units have been issued to the process-I and after processing, the output of each process is as under:
Process Output Normal loss
Process-I 9,750 units 2%
Process-II 9,400 units 5%
Process-III 8,000 units 10%
No stock of raw materials or of work-in-progress was left at the end. Calculate the cost of finished goods.

Question 21 - May 2012

A product passes through two processes A and B. During the year 2011, the input to process A of basic raw
material was 8,000 units @ ₹. 9 per unit. Other information for the year is as follows:
Particulars Process A Process B
Output units 7,500 4,800
Normal loss (% to input) 5% 10%
Scrap value per unit (₹.) 2 10
Direct wages (₹.) 12,000 24,000
Direct materials (₹.) 6,000 5,000
Selling price per unit (₹.) 15 25
Total overheads 17,400 were recovered as percentage of direct wages. Selling expenses were 5,000. There
are not allocated to the processes. 2/3 of the output of Process A was passed on to the next process and the
balance was sold. The entire output of Process B was sold. Prepare Process A and B Accounts.

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Question 22 - Rtp May 2023

‘Dairy Wala Private limited’ is engaged in the production of flavoured milk. Its process involve filtration and
boiling of milk after that some sugar, flavour, colour is added and then letting it cool to fill the product into
clean and sterile bottles. For Producing 10 litre of flavour milk, 100 litre of Raw milk is required, which extracts
only 45 litres of standardized milk.
Following information regarding Process – I has been obtained from the manufacturing department of Dairy
Wala Private limited for the month of December 2022:
Items (₹.)
Opening work-in process (13,500 litre)
Milk 1,50,000
Labour 45,000
Overheads 1,35,000
Milk introduced for filtration and boiling (3,00,000 litre) 15,00,000
Direct Labour 6,00,000
Overheads 18,00,000
Abnormal Loss: 3,000 litres
Degree of completion:
Milk 100%
Labour and overheads 80%
Closing work-in process: 27,000 litres
Degree of completion:
Milk 100%
Labour and overheads 80%
Milk transferred for Packing: 1,18,500 litres
You are required to PREPARE using average method:
(i) Statement of equivalent production,
(ii) Statement of cost,
(iii) Statement of distribution cost, and
(iv) Process-I Account.
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