PROBLEMS

Question 1
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 second
process is transferred to finished stock. The following data related to
December, 2007:
Process I Process II
25,000 units introduced at a cost of Rs. 2,00,000
Material consumed Rs. 1,92,000 96,020
Direct labour Rs. 2,24,000 1,28,000
Manufacturing expenses Rs. 1,40,000 60,000
Normal wastage of input 10% 10%
Scrap value of normal wastage (per unit) Rs. 9.90 8.60
Output in Units 22,000 20,000
Required:
a. Prepare Process I and Process II account.
Prepare Abnormal effective/wastage account as the case may be each
process.
Question 2:
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:
Process A Process B
Output units 7,500 4,800
 Normal loss (% to input) 5% 10%
Scrap value per unit (Rs.) 2 10
Direct wages (Rs.) 12,000 24,000
Direct expenses (Rs.) 6000 5000
Selling price per unit (Rs.) 15 25

Total overheads `17,400 were recovered as percentage of direct wages. Selling

expenses were `5,000. They are not allocate 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.
Question 3:
A product passes through three processes A, B and C, 10,000 units at a cost of
Re. 1 were issued to process A. The other direct expenses were:
Process A Process B Process C
Rs. Rs. Rs.
Sundry Materials 1,000 1,500 1,480
Direct labour 5,000 8,000 6,500
Direct expenses 1,050 1,188 1,605

The wastage of Process A was 5% and Process B was 4%. The wastage of
Process A was sold at Re. 0.25 per unit and that of B at Re. 0.50 per unit and
that of C at Re. 01.00 per unit. The overhead charges were 198% of direct
labour. The final Product was sold at Rs.10.00 per unit, fetching a profit of 20%
on sales. You are required to find the percentage of wastage in Process C.

Question 4:
ABC Limited manufactures a product ‘ZX’ by using the process namely RT. For
the month of May, 2007, the following data are available:
Process RT
Material introduced (units) 16,000
Transfer to next process (units) 14,400
Work in process:
At the beginning of the month (units) 4,000
(4/5 completed)
At the end of the month (units) 3,000
(2/3 completed)
Cost records:
Work in process at the beginning of the month
Material Rs. 30,000
Conversation cost Rs. 29,200
Cost during the month:
Materials Rs. 1,20,000
Conversation cost Rs. 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 and 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 and distribution of cost;
c. Process accounts.

Question 5:
XP Ltd. furnishes you the following information relating to process II.
a. Opening work-in-progress – NIL
b. Units introduced 42,000 units @ Rs.12
c. Expenses debited to the process:
a. Direct material = 61,530
b. Labour = 88,820
c. Overhead = 1,76,400
d. Normal loss in the Process = 2% of input
e. Closing work-in-progress – 1200 units
f. Degree of completion:
a. Materials 100%
b. Labour 50%
c. Overhead 40%
g. Finished output – 39,500 units
h. Degree of completion of abnormal loss:
a. Materials 100%
b. Labour 80%
c. Overhead 60%
i. Units scraped as normal loss were sold at Rs.4.50 per unit.
j. All the units of abnormal loss were sold at Rs.9 per unit.
Prepare: Prepare & necessary accounts.
Question 6: FIFO
The following data are available in respect of Process for the month of June,
2009
Opening work-in-progress 2,250 Units at Rs. 11,250
Degree of Completion:
Materials 100%
Labour 60%
Overheads 60%
Input of materials 22,750 Units at Rs. 88,500
Direct wages Rs. 20,500
Production overheads Rs. 41,000
Units scrapped 3,000 Units
Degree of Completion:
Material 100%
Labour 70%
Production overheads 70%
Closing work-in-progress: 2,500 Units
Degree of Completion:
Material 100%
Labour 80%
Production 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 Rs. 3.00 per unit. The company follows FIFO method of inventory
valuation.
You are required to:
a. Prepare statement of equivalent production
b. 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
c. Prepare process I account.

Question 7: Avg. Method

The following details are given in respect of a manufacturing unit for the
month of Aug̕2008:
1. Opening work in progress – 5000 units
a) Material – 100 % Complete Rs. 18,750
b) Labour – 60 % Complete 7,500
c) Overheads – 60 % Complete 3,750
2. Units introduced in the process 17500 units
3. Units transferred to next process 17500 units
4. Process cost for the period are:
a) Materials - Rs. 2,50,000
b) Labour - 1,95,000
c) Overheads - 97,500
The stage of completion of units in closing WIP is estimated to be
a) Materials – 100 % Complete
b) Labour – 50 % Complete
c) Overheads – 50 % Complete
Prepare a statement of equivalent units of production, statement of cost. Also
find the value of :
 a) Output transferred
b) Closing work in progress, using average cost method:
Question 8: FIFO + Abnormal Gain
The following data pertains to process I for march 2009 of DISA Ltd:
a. Opening WIP 1500 units at Rs. 15,000.
b. Degree of completion
a. Material 100%
b. Labour and Overhead 33 1/3 %.

C. Input of materials 18500 units at Rs.52000.

d. Direct labour Rs. 14,000.
e. Overhead Rs. 28,000
f. Closing WIP 5000 units:
a. Degree of completion
i. Material 90%
ii. Labour & OH 30%
g. Normal process loss is 10% of total input.
h. Scrap value Rs.2 per unit
i. Unit transferred to the next process 15000 units.
You are required to compute Statement of equivalent production, Prepare the
process account.

Question 9: Equivalent production for two process

A company produces a component, which passes through two processes.
During the month of April, 2012, Materials for 40,000 components were put
into process 1 of which 30,000 were completed and transferred to process 2.
Those not transferred to process 2 were 100% complete as to materials cost
and 50% complete as to labour and overheads cost. The process 1 costs
incurred were as follows:
Direct Material Rs. 15,000
Direct Wages Rs. 18,000
Factory overheads Rs. 12,000
Of those transferred to process 2, 28,000 units were completed and
transferred to finished goods stores. There was a normal loss with no salvage
value of 200 units in process 2. There were 1,800 units, remained unfinished in
the process with 100% complete as to materials and 25% complete as regard
to wages and overheads.
No further process material costs occur after introduction at the first process
until the end of the second process, when protective packing is applied to the
completed components. The process and packing costs incurred at the end of
the process 2 were:
Packing Materials Rs. 4,000
Direct wages Rs. 3,500
Factory overheads Rs. 4,500
Required:
1. Prepare Statement of Equivalent Production, Cost per unit and Process 1
A/c.
2. Prepare Statement of Equivalent Production, Cost per unit and Process 2
A/c.
Question 10: Equivalent production for two process
Following data are available for a product for the month of July, 2010.
Process I Process II
Opening work-in-progress NIL NIL
Cost Incurred during the month:
Direct materials 60,000 –
Labour 12,000 16,000
Factory overheads 24,000 20,000
Units of production:
Received in Process 40,000 36,000
Completed and transferred 36,000 32,000
Closing work-in-progress 2,000 ?
Normal loss in progress 2,000 1,500
Production remaining in Process has to be valued as follows:
Materials 100%
Labour 50%
Overheads 50%
There has been no abnormal loss in Process II
Prepare process accounts after working out the missing figures and with
detailed workings.
Question 11: Two material with FIFO
From the following information for the month of October 2008, prepare
Process III Cost Accounts.
Opening WIP in Process III 1,800 units at Rs.27,000
Transfer from Process II 47,700 units at Rs.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 Rs.1,77,840
Direct wages Rs.87,840
Production overheads Rs.43,920
Degree of completion:
Opening stock Closing stock Scrap
Material 80% 70% 100%
Labour 60% 50% 70%
Overheads 60% 50% 70%
The normal loss in the process was at 5% of the production and scrap
was sold @Rs.6.75 per unit.

Question 12: Process with JPBP

Three joint products are produced by passing chemicals through two
consecutive processes. Output from process 1 is transferred to process 2 from
which the three joint products are produced and immediately sold. The data
regarding the processes for April, 2009 is given below:
Process 1 Process 2
Direct material 2,500 kilos at Rs. 4 per kilo Rs. 10,000 -
Direct labour Rs. 6,250 Rs. 6,900
Overheads Rs. 4,500 Rs. 6,900
Normal Loss 10% of input -
Scrap value of loss Rs. 2 per kilo -
Output 2,300 kilos
Joint products A – 900 Kilos
B – 800 Kilos
C – 600 Kilos
There were no opening or closing stocks in either process or the selling prices
of the output from process 2 were:
Joint product A Rs. 24 per kilo
Joint product B Rs. 18 per kilo
Joint product C Rs. 12 per kilo

Required:
(a) Prepare an account for process 1 together with any Loss or Gain
Accounts you consider necessary to record the month’s activities.
(b) Calculate the profit attributable to each of the joint products by
apportioning the total costs from process 2
i. According to weight of output;
ii. By the market value of production.

Question 13:
Product A passes through three processes before it is completed and
transferred to the finished stock. There are no opening finished stock and no
opening W-I-P. The following data are available in respect of Process 1,2 and 3.
Details Process – 1 Process – 2 Process - 3
Direct material 1,00,000 25,000 20,000
Direct wages 75,000 50,000 1,00,000
Finished stock 25,000 32,500 47,500

The output of each process is transferred to the next process or to the finished
stock, as the case may be, at 20% profit on the transfer price.
Stock in process are valued at prime cost. Finished stock are valued at the price
at which it is received from the process – 3.
Sale of finished goods amounted to Rs. 5,50,000 and the stock is valued at Rs.
25,000.
Prepare:
a. Process Account and Finished stock account showing the profit element
each stage and
b. at Also compute stock valuation for balance sheet purpose.
Question 14:
A company is organized in to two processes. Raw material is introduced into
Process A and its output becomes the raw material for process B. The finished
goods of process B is sold in the market. Process A has a capacity to process an
input of 2,00,000 kg of raw material per annum. Purchase value of Raw
material is Rs.23,20,000. The normal scrap is 10% and 5% of input in Process A
and Process B respectively. The realizable value of scrap is Re 1 and Rs 2 per kg
respectively for processes A and B. The operating data for a year are as under:
Process A Process B
Direct Wages 22,00,000 21,00,000
Overheads 9,56,000 13,45,800
The fixed transport cost will be Rs 2,00,000 per annum irrespective of the
supplier from whom the raw material is purchased.
The output of the company emerging from Process B can be sold to three
customers at the prices and terms given below:
Customer Price/kg Discount Condition
K 65.00 2% Maximum quantity acceptable to K is
80,000 Kg.
L 64.00 2% Maximum quantity acceptable to L is
1,60,000 Kg.
M 61.80 - Provided the entire production of the
company is sold to M.
In the case of customers K and L, fixed delivery costs of Rs 5,000 in total per
month will be incurred. The variable delivery costs in respect of customers K
and L respectively are Rs 2.60 and Rs. 1.44 per kg. Customer M will collect the
output from the company’s factory at his own cost. You are required to
prepare process accounts & Income statement.