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    Cruise Manufacturing Limited

    Uploaded by

    hamza.mean.lion

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Cruise Manufacturing Limited

    Uploaded by

    hamza.mean.lion
    6 views3 pages

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    6 views3 pages

    Cruise Manufacturing Limited

    Uploaded by

    hamza.mean.lion

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Question:

    Cruise Manufacturing Limited (CML) produces a product that passes through two processes. The details of
    processing during the month of February 2024 are as follows:
    Process A Process B
    Cost of Conversion Cost of Conversion
    material costs material costs
    Costs of production ------------------- Rs. in ‘000 -------------------
    Opening work in process 16,000 6,000 30,000 10,000
    Cost incurred during the month 110,000 40,000 225,000 70,000
    Process Process
    Units completion Units completion
    Quantitative analysis
    Opening work in process 8,000 60% 5,000 30%
    Units started in/transferred from Process A 50,000 - 45,000 -
    Units rejected on inspection 2,500 - 3,000 -
    Units transferred to Process B/Warehouse 45,000 - 40,000 -
    Closing work in process 10,500 80% 7,000 50%
    Additional information:
    (i) CML uses weightage average method for inventory valuation.
    (ii) Material G36 is added at the start of the Process A, and another material, H148, is added at the start of
    the Process B.
    (iii) Inspection occurs when Process A is 70% complete and again when Process B is 80% complete. Units
    rejected in Process A are disposed of at a cost of Rs. 500 per unit whereas, units rejected inProcess B can
    be sold for Rs. 2,000 per unit. 5% of units are normally rejected at each stage of inspection.
    (iv) Units rejected during Process B were sold during the month but units rejected during Process Awere still
    in the factory at the month’s end.

    Required:
    a) Compute equivalent production units. (07)
    b) Compute the cost of finished goods produced, closing inventory and abnormalgains/losses,
    if any. (08)

    Answer:
    Process A:

    a) Equivalent units:
    Material Conversion
    Process B 45,000 45,000
    45,000
    c/d WIP 10,500 10,500 8,400 (80%)
    Abnormal gain (400) (400) (280) (70%)
    55,100 53,120

    Per unit:

    Material = (16,000 + 110,000 + 1,450) ÷ 55,100 = 2.3131

    Conversion = (6,000 + 40,000) ÷ 53,120 = 0.8659

    3.179
    b) Cost Allocation:
    Process B: 45,000 x 3.179 = 143,055

    c/d WIP: 10,500 x 2.3131 + 8400 x 0.8659 = 31,561

    Abnormal Gain: 400 x 2.3131 + 280 x 0.8659 = 1,168


    W-1)

    6,000

    16,000 Process A Rs.”000”

    b/d 8,000 22,000 Process B 4,500


    Material 50,000 110,000 Normal 2,900 -
    loss
    Conversion 40,000
    Disposal Cost of 1,450
    Normal Loss
    (2900 x 500)
    Abnormal Gain 400 c/d 10,500
    (2900 – 2500)

    Calculation of Normal Loss:

    Opening WIP 8000 (100% M, 60% C.C)


    Input 50,000
    c/d WIP 10,500 (100% M, 80% C.C)

    Stage of Inspection (100% M, 70% C.C)

    (8000 + 50,000) x 5% = 2,900

    Process B:

    a) Equivalent units:
    Process A Material Conversion
    Finished Goods 40,000 40,000 40,000
    40,000
    Abnormal Loss 850 850 680 (80%)
    850
    c/d WIP 7,000 7,000 3,500
    7,000
    47,850 47,850 44,180

    Per unit:
    Process A = (143,055 – 4,300) ÷ 47,850 = 2.8998

    Material = (30,000 + 225,000) ÷ 47,850 = 5.3292

    Conversion = (10,000 + 70,000) ÷ 44,180 = 1.8108


    10.0398
    b) Cost Allocation:
    Finished Goods: (40,000 x 10.0398) = 401,592

    Ab.Loss (850 x 2.8998 + 850 x 5.3292 + 680 x 1.8108) = 8,226

    c/d WIP (7,000 x 2.8998 + 7,000 x 5.3292 + 3,500 x 1.8108) = 63,941

    W-2)

    10,000

    30,000 Process B Rs.”000”

    b/d 5,000 40,000 Finished 40,000


    goods
    Process A 45,000 143,055 Normal 2,150 4,300
    loss (2,150x2,000)
    Material 225,000 Ab.loss 850
    Conversion 70,000 (3,000-
    2,150)
    c/d 7,000

    Calculation of Normal Loss:

    Opening WIP 5,000 (100% M, 30% C.C)


    Input 45,000
    Closing WIP 7,000 (100% M, 50% C.C)

    Stage of Inspection (100% M, 80% C.C)

    (5,000 + 45,000 – 7,000) x 5% = 2,150

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