Q-6 Spr-08 [Yahya Limited]

Yahya Limited produces a single product that passes through three departments, A, B and C. The company
uses FIFO method for process costing. A review of department A’s cost records for the month of January
2008 shows the following details:

Overhead is applied at the rate of 120% of direct labour. Normal spoilage is 5% of output. The spoiled
units are sold in the market at Rs. 6 per unit.
Required:
Compute the following for the month of January:
(a) Equivalent production units.
(b) Costs per unit for material, labour and factory overhead.
(c) Cost of abnormal loss (or gain), closing work in process and the units transferred to the next process.
(16)

Solution
(a) Equivalent production --------- Eq. units ---------
Units %
Material Conversion
Opening WIP 16,000
- Conversion 25% - 4,000

Started & completed 84,000 100% 84,000 84,000

[100,000 - 16,000]

Closing WIP 18,000

- Material 100% 18,000
- Conversion 50% 9,000

Abnormal loss (W-1) 3,000 100% 3,000 3,000

105,000 100,000
* Abnormal loss is assumed to be 100% complete
W-1 Quantity schedule Units
Opening WIP 16,000
Input 110,000
Closing WIP (18,000)
Normal loss [100,000 x 5%] (5,000)
Abnormal loss (bal.) (3,000)
Output 100,000

(b) Cost per unit Material Labor FOH

---------------- Rs. ------------------
Current period costs 430,500 230,000 276,000 [230,000 x 120%]
Normal loss [5,000 x 6] (30,000) - -
400,500 230,000 276,000

Equivalent units 105,000 100,000 100,000

Cost per unit (Rs.) 3.81 2.30 2.76

(c) Statement of evaluation

Cost of completed units Rs.
Opening WIP
b/d [64,000 + 28,000 + 28,000 x 120%] 125,600
Conversion [4,000 x (2.30 + 2.76)] 20,240
145,840
Started & completed units [84,000 x (3.81 + 2.30 + 2.76)] 745,080
890,920

Cost of abnormal loss 26,610

[3,000 x (3.81 + 2.30 + 2.76)]

Cost of Closing WIP

Material [18,000 x 3.81] 68,580
Conversion [9,000 x (2.30 + 2.76)] 45,540
114,120
Q.4 Hornbill Limited (HL) produces certain chemicals for textile industry. The company has three
production departments. All materials are introduced at the beginning of the process in Department-A and
subsequently transferred to Department-B. Any loss in Department-B is considered as a normal loss.
Following information has been extracted from the records of HL for Department-B for the month of
August 2011:

Department B
Opening work in process (Litres) Nil
Closing work in process (Litres) 10,500
Units transferred from Department-A (Litres) 55,000
Units transferred to Department-C (Litres) 39,500
Labour (Rupees) 27,520
Factory overhead (Rupees) 15,480

Materials from Department-A were transferred at the cost of Rs. 1.80 per litre. The degree of completion
of work in process as to cost originating in Department-B were as follows:

WIP Completion %
50% units 40%
20% units 30%
30% units 24.5%

Required:
Statement Of Evaluation (15 marks)
Hornbill [Q-4 Aut-11]
(a) Equivalent production --------- Eq. units ---------
Units %
Dep-A Conversion
Completed units 39,500 100% 39,500 39,500

Closing WIP 10,500

- Material 100% 10,500
- Conversion
50% units 40% 2,100
20% units 30% 630
30% units 24.5% 772
50,000 43,002

W-1 Quantity schedule Units

Opening WIP -
Input 55,000
Closing WIP (10,500)
Normal loss (balancing) (5,000)
Output 39,500

(b) Cost per unit Dep-A Conv.

---------------- Rs. ------------------
Current period costs [55,000 x 1.8] [27,520 + 15,480] 99,000 43,000

Equivalent units 50,000 43,002

Cost per unit (Rs.) 1.98 1.00

(c) Statement of evaluation Rs.

Cost of completed units 117,710
[39,500 x (1.98 + 1.00)]

Cost of Closing WIP

De-A cost [10,500 x 1.98] 20,790
Conversion:
- 50% units [2,100 x 1.00] 2,100
- 20% units [630 x 1.00] 630
- 24.50% units [772 x 1.00] 772
24,292
Q.3 Bela Enterprises (BE) produces a chemical that requires two separate processes for its
completion. Following information pertains to process II for the month of August 2016:
kg Rs. in '000

Opening work in process (85% to conversion) 5,000 2,000

Costs for the month:
Received from process I 30,000 18,000
Material added in process II 15,000 10,000
Conversion cost incurred in process II - 11,000
Finished goods transferred to warehouse 40,000 -
Closing work in process (60% to conversion) 4,000 -

In process II, material is added at start of the process and conversion costs are incurred evenly
throughout the process. Process losses are determined on inspection which is carried out on
80% completion of the process. Process loss is estimated at 10% of the inspected
quantity and is sold for Rs. 100 per kg.
BE uses FIFO method for inventory valuation.

Required:
(a) Prepare a statement of equivalent production units. (04)
(b) Compute cost of:
(i) finished goods (ii) closing WIP (iii) abnormal loss/gain (09)
(c) Prepare accounting entries to record production gain/loss for the month. (03)
Q-3 Aut-16 [SOLUTION]
Bela Enterprises
(a)
Statement of Equivalent Units
------------ Equivalent Units -----------
Output Total Units % complete Process I New material Conversion
Opening WIP: 5,000
- Conversion 15% 750
Started and Finished units 35,000 100% 35,000 35,000 35,000
Closing WIP: 4,000
- Process I 100% 4,000
- New material 100% 4,000
- Conversion 60% 2,400
Abnormal Loss (W-1): 1,900
- Process I 100% 1,900
- New material 100% 1,900
- Conversion 80% 1,520
Total Units 45,900 40,900 40,900 39,670

(b)(i) Cost of Finished Goods Rs.

Opening WIP:
b/f balance 2,000,000
New material -
Conversion [750 x 277.29 (W-3)] 207,968
2,207,968
Started and finished in the Period:
[35,000 x 951.86 (W-3)] 33,315,100
35,523,068

(ii) Closing WIP

Process I [4,000 x 430.07 (W-3)] 1,720,280
New material [4,000 x 244.50 (W-3)] 978,000
Conversion [2,400 x 277.29 (W-3)] 665,496
3,363,776

(iii) Abnormal Loss

Process I [1,900 x 430.07 (W-3)] 817,133
New material [1,900 x 244.50 (W-3)] 464,550
Conversion [1,520 x 277.29] 421,481
1,703,164
(c)
Entries Dr. Cr.
(i) Scrap inventory 410,000
WIP-2 410,000

(ii) Abnormal Loss 1,703,164

WIP-2 1,703,164

(iii) Scrap inventory [1,900 x 100] 190,000

P&L 1,513,164
Abnormal Loss 1,703,164

(iv) Cash [6,000 x 100] 600,000

Scrap inventory 600,000

Working - 1 Units
Opening WIP 5,000
Material Added 15,000
Received from Process 1 30,000
Closing WIP (4,000)
Normal Loss [W-2] (4,100)
Abnormal loss (bal.) (1,900)
Output 40,000

Working - 2
New material 15,000
Add: Received from Process 1 30,000
Less: Closing WIP (4,000)
Inspected Quantity 41,000
Normal Loss 4,100

Working - 3
Statement of Cost per Equivalent Units
Conversion
Process I Material Cost
Cost
Total cost for the period 18,000,000 10,000,000 11,000,000
Scrap value (410,000) - -
[4100 Kg x Rs.100/Kg] 17,590,000 10,000,000 11,000,000

Equivalent Units 40,900 40,900 39,670

Total
Cost Per Eq. Unit 430.07 244.50 277.29 951.86
Q.3 Smart Processing Limited produces lubricants for industrial machines. Material COX is
introduced at the start of the process in department A and subsequently transferred to
department B. Normal loss in department A is 5% of the units transferred.

In department B, material COY is added just after inspection which takes place when the production
is 60% complete. 10% of the units processed are evaporated before the inspection stage.
However, no evaporation takes place after adding material COY. During the year, actual
evaporation in department B was 10% higher than the estimated normal losses because of high
level of Sulpher contents in natural gas used for processing.

Other details for the year ended December 31, 2009 are as under:

Department A Department B
---------- Rupees ----------
Opening work in process 2,184,000 2,080,000
Material input - 600,000 Litres 17,085,000
- 500,000 Litres 9,693,000
Labour 8,821,000 6,389,000
Overheads 2,940,000 3,727,000

Department A Department B

Completion % Completion %
Litres Conversion Litres Conversion
Material Material
costs costs
Opening WIP 64,500 100 60 40,000 100 60
Closing WIP 24,000 100 70 50,000 100 80

Conversion costs are incurred evenly throughout the process in both departments. The company uses
FIFO method for inventory valuation.

Required:
(a) Equivalent production units
(b) Cost of abnormal loss and closing WIP
(c) Cost of finished goods produced (22)
Smart Processing Ltd [Q-3 Spr-10]
Department A
Quantity schedule Units
Opening WIP 64,500
Input 600,000
Closing WIP (24,000)
640,500
Normal loss [640,500 x 5/105] (30,500)
Output 610,000

Equivalent production Units % ---------- Eq. units ---------

Material Conversion
Opening WIP: 64,500
- Conversion 40% 25,800

Started and completed 545,500 100% 545,500 545,500

[610,000 - 64,500]

Closing WIP: 24,000

- Material 100% 24,000
- Conversion 70% 16,800

569,500 588,100

Cost per unit

Current period cost [8,821,000+2,940,000] Rs. 17,085,000 11,761,000
Units 569,500 588,100
Cost per unit Rs. 30.00 20.00
-
Statement of evaluation
Cost of complete and transferred out units ---------- Rs. ---------
Opening WIP:
b/d 2,184,000
Current period [25,800 x Rs. 20] 516,000 2,700,000

Started and completed [545,500 x (Rs. 30 + Rs. 20)] 27,275,000

29,975,000

Cost of closing WIP Rs.

Material [24,000 x Rs. 30] 720,000
Conversion [16,800 x Rs. 20] 336,000
1,056,000
Department B
Quantity schedule Units
Opening WIP 40,000
Transfer in 610,000
Input 500,000
Closing WIP (50,000)
Normal loss [610,000 x 10%] (61,000)
Abnormal loss [61,000 x 10%] (6,100)
Output 1,032,900
------------------ Eq. units ----------------
Equivalent production Units % Dept A COY Conversion

Opening WIP: 40,000

- Conversion 40% - - 16,000

Started and completed 992,900 100% 992,900 992,900 992,900

[1,032,900 - 40,000]

Abnormal loss: 6,100

- Conversion 60% 3,660

Closing WIP: 50,000

- Material 100% 50,000 50,000
- Conversion 80% 40,000

1,042,900 1,042,900 1,052,560

Cost per unit (for FG & Closing WIP) *

Current period cost [6,389,000+3,727,000] Rs. 29,642,340 9,693,000 10,116,000
Units 1,042,900 1,042,900 1,052,560
Cost per unit Rs. 28.42 9.29 9.61

Rs.
* Dep-A cost
[(610,000 - 67,100) x 54.60**] 29,642,340

**Revised per unit cost of transferred units: Rs.

Total cost of transferred units 29,975,000
Units after normal loss [610,000 - 61,000] 549,000
54.60
Statement of evaluation
Cost of finished goods ---------- Rs. ---------
Opening WIP:
- b/d 2,080,000
- conversion [16,000 x Rs. 9.61] 153,760 2,233,760

Started and completed [992,900 x (Rs. 28.42 + Rs. 9.29 + Rs. 9.61)] 46,984,028
49,217,788

Cost of closing WIP Rs.

Dept A [50,000 x Rs. 28.42] 1,421,000
New material [50,000 x Rs. 9.29] 464,500
Conversion [40,000 x Rs. 9.61] 384,400
2,269,900

Cost of Abnormal loss Rs.

Dept A [6,100 x 54.60] 333,060
Conversion [3,660 x Rs. 9.61] 35,173
368,233
 Q.4 Green Limited (GL) produces a chemical that passes through two processes before
being transferred to warehouse. Following information pertains to Process II for the
month of
August 2021:

Production Cost
(kg) (Rs. in '000)
Opening work in process 7,500 3,000
Transferred from Process I 45,000 27,000
Material added in Process II 22,500 11,250
Conversion costs incurred in Process II - 1,500
Finished goods transferred to warehouse 60,000 -
Closing work in process 9,000 -

In Process II, material is added at start of the process and conversion costs are incurred evenly
throughout the process. Process loss is determined on inspection which is carried out on
60% completion of the process. Process loss is estimated at 10% of the inspected quantity
and is sold for Rs. 200 per kg.

The details of opening and closing work in processes are as follows:

Opening work in process Closing work in process

kg Completion % kg Completion %
5,250 80% 5,400 70%
2,250 40% 3,600 30%

GL uses FIFO method for inventory valuation.

Required:
Prepare Process II account for the month of August 2021. (10)
Q-4 Aut-21 [SOLUTION]
Process II Account
Units Rs. 000 Units Rs. 000
b/d 7,500 3,000 Transfer out 60,000 36,228
Transfer in 45,000 27,000 Normal loss [6,615 x 200] 6,615 1,323
Material 22,500 11,250 c/d 9,000 5,581
Conversion - 1,500
Abnormal gain 615 382
75,615 43,132 75,615 43,132

W-1 Quantity schedule Units

Opening WIP [5,250 + 2,250] 7,500
Transfer in 45,000
New material 22,500
Closing WIP [5,400 + 3,600] (9,000)
Normal Loss [W-1.1] (6,615)
Abnormal gain (bal.) 615
Output 60,000

W-1.1 Normal loss

Transfer in 45,000
New material 22,500
Opening WIP 2,250
Closing WIP (3,600)
Inspected Quantity 66,150
Normal Loss [66,150 x 10%] 6,615

W-2 Equivalent Units ------------ Equivalent Units -----------

Units % Process I New material Conversion
Opening WIP:
- Conversion 5,250 20% - - 1,050
- Conversion 2,250 60% - - 1,350

Started & Finished units 52,500 100% 52,500 52,500 52,500

[60,000 - 7,500]

Closing WIP:
- Process I 9,000 100% 9,000 - -
- New material 9,000 100% - 9,000 -
- Conversion 5,400 70% - - 3,780
- Conversion 3,600 30% - - 1,080

Abnormal gain (W-1):

- Process I 615 100% (615) - -
- New material 615 100% - (615) -
- Conversion 615 60% - - (369)
Total Units 60,885 60,885 59,391
W-3 Cost per unit Process I Material Conversion
-------------------- Rs. ----------------------
Total cost for the period 27,000,000 11,250,000 1,500,000
Normal loss [6,615 x 200] (1,323,000) - -
25,677,000 11,250,000 1,500,000

Equivalent Units 60,885 60,885 59,391

Total
Cost per unit (Rs.) 421.73 184.77 25.26 631.76

W-4 Cost of units

Cost of Finished Goods Rs.
Opening WIP:
b/f balance 3,000,000
Conversion [(1,050 + 1,350) x 25.26 (W-3)] 60,624
3,060,624
Started and finished in the Period:
[52,500 x 631.76 (W-3)] 33,167,400
36,228,024

Closing WIP
Process I [9,000 x 421.73 (W-3)] 3,795,570
New material [9,000 x 184.77 (W-3)] 1,662,930
Conversion [(3,780 + 1,080) x 25.26 (W-3)] 122,764
5,581,264

Abnormal gain
Process I [615 x 421.73 (W-3)] 259,364
New material [615 x 184.77 (W-3)] 113,634
Conversion [369 x 25.26 (W-3)] 9,321
382,318
Q.9 Beijing Limited (BL) is engaged in manufacturing of a single product which passes through two
processes. Following information relating to process II is extracted from BL’s records for the
month of February 2022:

Rs. in '000
Opening work in process 3,000
Transferred from process I - 295,000 litres 21,000
Material - 200,000 litres 8,000
Labour 8,500
Overheads 3,200

Material is added at 60% completion of process II after inspection is carried out. Normal loss is
estimated at 10% of the input. Conversion costs are incurred evenly throughout the process.
Information related to opening and closing work in process and goods completed and
transferred to finished goods are as follows:

Opening work in process Closing work in process Finished goods

Litres Completion % Litres Completion % Litres
40,000 40% 50,000 70% 450,500

The company uses FIFO method for inventory valuation.

Required:
Calculate the following for process II:

(a) Quantity schedule and statement of equivalent production units. (06)

(b) Cost of finished goods, closing work in process and abnormal gain/loss. (08)
Q-9 Spr-22 [SOLUTION]
(a)
Quantity schedule Units
Opening WIP 40,000
New material 200,000
Transfer in 295,000
Closing WIP (50,000)
Normal Loss [W-1] (33,500)
Abnormal loss (bal.) (1,000)
Output 450,500

W-1
Opening WIP 40,000
Transfer in 295,000
Inspected Quantity 335,000
Normal Loss 10% 33,500

Statement of Equivalent Units

------------ Equivalent Units -----------
Output Total Units % complete Process I New material Conversion
Opening WIP: 40,000
- New material 100% 40,000
- Conversion 60% 24,000
Started and Finished units 410,500 100% 410,500 410,500 410,500
[450,500 - 40,000]
Closing WIP: 50,000
- Process I 100% 50,000
- New material 100% 50,000
- Conversion 70% 35,000
Abnormal Loss (W-1): 1,000
- Process I 0% -
- New material 0% -
- Conversion 60% 600
Total Units 501,500 460,500 500,500 470,100
(b)
Cost of finished goods ---------- Rs. ---------
Opening WIP:
- b/d 3,000,000
- New material [40,000 x Rs. 15.98(W-2)] 639,200
- conversion [24,000 x Rs. 24.89(W-2)] 597,360 4,236,560

Started and completed [410,500 x (Rs. 45.43 + Rs. 15.98 + Rs. 24.89)(W-2)] 35,426,150
39,662,710

Cost of closing WIP Rs.

Process I [50,000 x Rs. 45.43] 2,271,500
New material [50,000 x Rs. 15.98] 799,000
Conversion [35,000 x Rs. 24.89] 871,150
3,941,650

Cost of Abnormal loss Rs.

Process I [1,000 x 80.31(W-2.2)] 80,310
Conversion [600 x Rs. 24.89] 14,934
95,244

W-2
Cost per unit (for FG & Closing WIP)
Current period cost (Rs.) (W-2.1) 20,920,755 8,000,000 11,700,000 [8.5m + 3.2m]

Units 460,500 500,500 470,100

Cost per unit (Rs.) 45.43 15.98 24.89

Rs.
W-2.1
[(295,000 - 33,500 - 1,000) x 80.31 (W-2.2)] 20,920,755

W-2.2 Rs.
Total cost of transferred units 21,000,000
Units after normal loss [295,000 - 33,500] 261,500
80.31
Q.3 Ravi Limited (RL) is engaged in production of industrial goods. It receives orders from steel
manufactures and follows job order costing. The following information pertains to an order
received on 1 December 2016 for 6,000 units of a product:

(i) Production details for the month of December 2016:

Units
Produced and transferred to finished goods 3,200
Delivered to the buyer from the finished goods 3,000
Units rejected during inspection 120
Closing work in process (100% material and 80% conversion) 680

(ii) Actual expenses for the month of December 2016:

Rupees
Direct material 1,140,000
Direct labour (6,320 hours) 948,000
Factory overheads 800,000

Additional information:
Factory overheads are applied at Rs. 120 per hour. Under/over applied factory
overheads are charged to profit and loss account.
Units completed are inspected and transferred to finished goods. Normal rejection is
estimated at 10% of the units transferred to finished goods. The rejected units are sold
as scrap at Rs. 150 per unit.
RL uses weighted average method for inventory valuation.
Required:
(a) Prepare work in process account for the month of December 2016. (08)
(b) Prepare accounting entries to record: over/under applied overheads
production losses and gains (05)
Answer to Q-3 [Spr-17]
Ravi Limited
(a)
Work in Process account
Units Rs. Units Rs.
Material (balancing) 4,000 1,140,000 Transferred out * 3,200 2,490,332
Labor 948,000 Normal loss [3,200 x 10%] 320 48,000
FOH applied [6,320 x 120] 758,400 Closing WIP 680 463,714
Abnormal gain [320 - 120] 200 155,646

4,200 3,002,046 4,200 3,002,046

-
* After adjusting the rounding off difference

W-1
Equivalent production
-------- Eq. units --------
Units % Material Conversion
Transferred units 3,200 100% 3,200 3,200
Abnormal gain (200) 100% (200) (200)
Closing WIP: 680
Material 100% 680 -
Conversion 80% - 544

[A] 3,680 3,544

Cost per unit ------------ Rs. ------------

Material Conversion
Total cost 1,140,000 1,706,400
Scrap value of normal loss [320 x 150] (48,000) -
[B] 1,092,000 1,706,400

Per unit cost [B / A] 296.74 481.49

Statement of evaluation Rs.

Cost of completed units 2,490,336
[3,200 x (296.74 + 481.49)]

Cost of closing WIP:

Material [680 x 296.74] 201,783
Conversion [544 x 481.49] 261,931
463,714

Cost of abnormal gain 155,646

[200 x (296.74 + 481.49)]
(b)
Entries Dr. Cr.
(i) P & L [800 - 758.4] 41,600
FOH control 41,600
[Under applied FOH charged to P&L]

(ii) Scrap inventory 48,000

WIP 48,000
[Normal loss recorded]

(iii) WIP 155,646

Abnormal gain 155,646
[Abnormal gain recorded]

(iv) Abnormal gain 155,646

P&L 125,646
Scrap inventory [200 x 150] 30,000
[Abnormal gain charged to P&L]

(v) Cash [120 x 150] 18,000

Scrap inventory 18,000
[Rejected units sold as scrap]
Q.1 Tulip Enterprises (TE) manufactures a product Alpha that requires two separate processes,
A and B. Following information has been extracted from the cost records of Process B for the
month of February 2019:
Process A Process B cost
Quantity
cost Material Conversion
Liters ------------- Rs. in '000 -------------
Opening work-in-process – Process B 10,000 1,500 600 400
(80% complete as to conversion)
Cost for the month:

- Received from process A 90,000 14,000 - -

- Added during process B 12,000 - 7,000 5,600
Closing work-in-process – Process B 9,500 - - -
(70% complete as to conversion)

Additional information:

(i) Materials are added at start of the process.

(ii) Normal loss is estimated at 5% of the input. Loss is determined at completion of the
process. Loss of each liter results in a solid waste of 0.75 kg. During the month of
February 2019, solid waste produced was 6,000 kg.
(iii) Solid waste is sold for Rs. 170 per kg after incurring further cost of Rs. 20 per kg.
(iv) TE uses weighted average method for valuation of inventory.

Required:
Prepare accounting entries to record the transactions of process B. (Narrations to accounting
entries are not required) (12)
Ans. 1 [Spr-19]
Tulip Enterprises Dr. Cr.
Accounting entries ----- Rs.'000 ----
WIP (B) 14,000.00
WIP (A) 14,000.00
[Units received from Process A]
WIP (B) 12,600.00
RM inventory 7,000.00
Wages control & FOH control 5,600.00
[New material and conversion cost incurred]
Scrap inventory 653.44
Bank [5,125(W-1) x 0.75 x 20] 76.88
WIP (B) (W-3) 576.56
[Normal loss recorded in Process account & further cost incurred]
Abnormal loss [2,875(W-1) x Rs. 268.42 (W-3)] 771.71
WIP (B) 771.71
[Abnormal loss recorded in Process account]
Scrap inventory [2,875 x 0.75 x 170] 366.56
P&L (balancing) 448.27
Bank [2,875 x 0.75 x 20] 43.13
Abnormal loss [2,875 x 268.42(W-3)] 771.71
[Further cost incurred and Charging of abnormal loss]
Cash 1,020.00
Scrap inventory [653.44 + 366.56] 1,020.00
[Sale of solid waste]
Finished goods [94,500 (W-1) x Rs. 268.42 (W-3)] 25,365.69
WIP (B) 25,365.69
[Units completed and transferred out]

Workings
W-1 Quantity schedule Ltrs.
Opening WIP 10,000
Transfer in 90,000
New material 12,000
Closing WIP (9,500)
Inspected units 102,500
Normal loss [102,500 x 5%] (5,125)
Abnormal loss (W-1.1) (2,875)
Output 94,500
W-1.1
Actual loss [6,000kg / 0.75Kg] 8,000
Normal loss (5,125)
Abnormal loss 2,875

W-2 Equivalent production Units (Ltr) SOC Process-A New material Conversion
-------------- Ltrs ---------------
Completed units 94,500 100% 94,500 94,500 94,500
Abnormal loss 2,875 100% 2,875 2,875 2,875
Closing WIP: 9,500
P-A 100% 9,500
New material 100% 9,500
Conversion 70% 6,650
[A] 106,875 106,875 104,025

W-3 Cost per unit Process-A New material Conversion

------------- Rs.'000 -------------
Opening WIP 1,500.00 600.00 400.00
Current period cost 14,000.00 7,000.00 5,600.00
Scrap value of NL [5,125 x 0.75 x (170 - 20)] (576.56) - -
[B] 14,923.44 7,600.00 6,000.00
Cost per unit (Rs.) [B/A] 139.63 71.11 57.68 268.42
Q.6 Fowl Limited (FL) manufactures two joint products X and Y from a single production process. Raw material
Benz is added at the beginning of the process. Inspection is performed when the units are 50% complete.
Expected loss from rejection is estimated at 10% of the tested units. Following details are available for the
month of May 2012:

Units Material Conversion cost

(Rs.) (Rs.)
Opening work in process 15,000 90,000 25,000
Transferred to finished goods:

− Product- X 50,000

- -
− Product- Y 25,000

Cost incurred in May 2012 - 547,125 228,875

Loss due to rejection 12,500 - -
Closing work in process 10,000 - -

Additional information:
(i) Opening and closing work in process are 75% complete.
(ii) The normal loss is sold as scrap at the rate of Rs. 1.50 per unit.
(iii) Production costs are allocated to joint products on the basis of weight of output.
(iv) The company uses weighted average method for inventory valuation.

Required:
Process Account for the month of May 2012. (15 marks)
Fowl Limited [Q-6 Aut-12]
Work in Process account
Units Rs. Units Rs.
b/d [90 + 25] 15,000 115,000 Transfer out:
Material (W-1) 82,500 547,125 -X 50,000 500,000
Conversion - 228,875 -Y 25,000 250,000
NL [82,500 x 10%] 8,250 12,375
AL [12,500 - 8,250] 4,250 36,125
c/d 10,000 92,500
97,500 891,000 97,500 891,000

W-1 Units
Opening WIP 15,000
Input (balancing) 82,500
Closing WIP (10,000)
Actual loss (12,500)
Output 75,000

W-2
W-2.1 Equivalent production -------- Eq. units --------
Units % Material Conversion
Transferred units 75,000 100% 75,000 75,000
Abnormal loss: 4,250
Material 100% 4,250 -
Conversion 50% - 2,125
Closing WIP: 10,000
Material 100% 10,000 -
Conversion 75% - 7,500
[A] 89,250 84,625

W-2.2 Cost per unit ------------ Rs. ------------

Material Conversion
Opening WIP 90,000 25,000
Current period cost 547,125 228,875
Scrap value of NL [8,250 x 1.50] (12,375) -
[B] 624,750 253,875
Per unit cost [B / A] 7.00 3.00

W-2.3 Statement of evaluation Rs.

Cost of completed units [75,000 x (7 + 3)] 750,000
Allocated:
- X [750,000 x 50/75] 500,000
- Y [750,000 x 25/75] 250,000
Cost of AL:
Material [4,250 x 7] 29,750
Conversion [2,125 x 3] 6,375
36,125

Cost of closing WIP:

Material [10,000 x 7] 70,000
Conversion [7,500 x 3] 22,500
92,500