IPCC COSTING
PROCESS COSTING
Q 1:
a) From the following information given to you, prepare a process account.
Transfer from 1st process 1,000 units, @ Rs. 4 per unit.
Rs.
Labour cost 500
Material 2,000
Production overheads 350
The normal process loss has been estimated @ 10% of the input which can be sold at Rs.1.00 per unit. Actual production realised 850 units.
b) From the information given in Q1 prepare process accounts. However the production realised in this case may be taken as 900 units.
c) From the information given in Q1. prepare process accounts. Assume actual production in this case as 920 units.
Q 2: Product 'P' passes through three processes to completion. Following are the relevant details
(a) Elements of cost :
PROCESS / Total Rs. / No.1 Rs. / No.2 Rs. / No.3 Rs.Direct Materials
/ 8,462 / 2,000 / 3,000 / 3,462Direct Labour / 12,000 / 3,000 / 4,000 / 5,000
Direct Expenses / 726 / 500 / 226 / -
Production overhead / 6,000 / - / - / -
(b) 1,000 units at Rs.5 each were issued to process No.1
(c) Output from each process was :
Process No.1 / 920 UnitsProcess No.2 /
870 Units
Process No.3 / 800 Units(d) Normal loss per process was estimated as :
Process No.1 / 10% of units introducedProcess No.2 / 5% of units introduced
Process No.3 / 10% of units introduced
(e) The loss in each process represented scrap which could be sold to a merchant at value as follows:
Process No.1 / Rs.3 per unitProcess No.2 / Rs.3 per unit
Process No.3 / Rs.6 per unit.
(f) There was no stock of materials or work in progress in any department at the beginning or end of the period. The output of each process passes directly to the next process and finally to finished stock. Production overhead is allocated to each process on the basis of 50% of the cost of direct labour.
Prepare Process Accounts, Normal Loss, Abnormal Loss & Abnormal Gain Accounts.
Q 3:
Fertilisers Ltd. manufactures and sell three brands of fertilisers. The necessary details are:
Process A (Rs.) / Process B (Rs.) / Proces C (Rs.)Raw materials : Tons / 200 / 71 / 264
Cost per ton / 100 / 300 / 250
Direct wages Rs. / 8,000 / 3,490 / 2,850
Direct expenses Rs. / 2,520 / 2,400 / 3,820
Finished product sold / 25% / 50% / 100%
Finished product transferred to
next process / 75% / 50%
Sale of scrap per ton / 80 / 100 / 120
In each process 6% of the total weight is lost and 8% is scrap. All sales are made to show a gross profit of 20% on process cost. Prepare process cost accounts and find the profits of the company.
Q 4:
A company using Process costing manufactures a Single Product, which Passes through two Processes. The output of Process I becomes the input of Process II & the output of Process II is transferred to the finished stock. Normal Losses & Abnormal losses are defective units having a scrap value & cash is received at the end of the period for all such units.
The following information relates to the four-week period of accounting period No.7.
Raw material issued to Process I was 3,000 units at a cost of Rs.5/-Per unit.
There was no opening or closing work-in-progress but opening & Closing stocks of finished goods were 900 units & 1000 units valued at Rs.20,000 & 23,000 respectively. The finished Goods are sold at cost plus 20%.
Process I / Process IINormal loss as a Percentage of Input / 10% / 5%
Output in units / 2,800 / 2,600
Scrap value for Normal Loss per unit / Rs.2 / Rs.5
Scrap value for Abnormal Loss per unit / - / Rs.4
Additional components / Rs.1,000 / Rs.780
Direct wages incurred / Rs.4,000 / Rs.6,000
Direct Expenses incurred / Rs.10,000 / Rs.14,000
Production over head as a percentage of
Direct wages / 70% / 125%
Prepare the necessary Accounts including a Profit & Loss A/c assuming that the management expenses incurred are Rs.4,500/- & selling expenses incurred are Rs.3,500/-.
Q 5:
The product of a manufacturing unit passes through two distinct processes. From
past experience the incidence of wastage is ascertained as under:
Process A 2 per cent.
Process B 10 per cent.
In each case the percentage of wastage is computed on the number of units entering the process concerned. The sales realisation of wastage in Process A and B are Rs.25 per 100 units and Rs.50 per 100 units respectively.
The following information is obtained for the month of April, 1998 : 40,000 units of crude material were introduced in process A at a cost of Rs.16,000.
Process A (Rs.) / Process B (Rs.)Other Materials / 16,000 / 5,000
Direct Labour
/ 9,000 / 8,000Direct expenses / 8,200 / 1,500
Units / Units
Output / 39,000 / 36,500
Finished Product Stock
April 1 / 6,000 / 5,000
April 30 / 5,000 / 8,000
Value of stock per Unit on April 1st / Rs.1.20 / Rs.1.60
Stocks are valued and transferred to subsequent process at weighted average cost. Prepare various accounts assuming sales of Rs.1,00,000. Also by FIFO method.
Q 6: NA
Q 7:
Satyug Times Ltd. Submits the following information in respect of its product
which passes through three consecutive process A, B & C, for the month ended 31st
Jan, 2000.
Particulars / Process A / Process B / Process CQuantitative Information (Kgs.)
Basic Raw Materials@ Rs.40/- per kg. / 80,000 / - / -
Normal Yield / 80% / 60% / 50%
Output during the month / 62,000 / 36,000 / 21,000
Stock of Process output
31-12-1999 / 8,000 / 8,000 / 5,000
31-01-2000 / 10,000 / 4,000 / 4,000
Other Additional Information
Process material / Rs.3,45,000 / 8,26,000 / 6,17,000
Labour man days / 2,400 / 1,500 / 1,000
Labour rate per man day / Rs.80 / Rs.100 / Rs.150
Machine overheads / 60% of Wages / 50% of Process material / Rs.2,34,000
Other manufacturing overheads / Rs.2,75,800 / Rs.1,63,000 / Rs.1,27,000
Value of opening stock per kg. / Rs.60 / Rs.140 / Rs.300
Scrap value per kg. / Rs.10 / Rs.15 / Rs.20
The output from process C is sold at Rs.350 per Kg. Closing stock is to be valued at the respective cost of each process during the month. As a cost accountant, you are required to prepare Process Accounts, Process Stock Accounts, Abnormal Loss A/c. Abnormal Gain A/c and a Costing Profit and Loss A/c.
Q 8: NA
Q 9:
A product passes through three different process viz. A, B C and thereafter it is
transferred to finished stock. The information is as under:
Particulars Process A process B Process C
i) Units introduced ? ------
(per unit Rs 15)
ii) Actual production 11,500 ? ?
(no. of units)
iii) Normal wastage 2.1\2% 8% 10%
(% of unit)
iv) Sale value of wastage Rs.20 Rs.50 Rs.75
(per 25 unit)
v) Abnormal wastage 200 ------
(no. of units and
cost per units Rs 25)
vi) Abnormal gain ------200
(no. of units cost per Rs 40)
vii) Normal cost of normal
output
(per unit in rupees) --- 35 ---
Additional Information:
i) Factory overheads to be distributed as 100 per cent of direct wages in all three processes.
ii) The abnormal wastage was 2\3rd of the normal wastage in process A.
Prepare A, B and C process Accounts and also prepare Abnormal Loss. Account and Abnormal Gain account.
Q 10: M/s Step wise production Co. Ltd. Manufactures one item which is produced in three stages i.e. A, B, C. From past experience the Company has ascertained that the normal loss in each process is as follows.
Process A 5%
Process B 10%
Process C 15%
During the month of January 1988 production was started with 20,000 units of raw material costing Rs10 each. The following are the details for the month.
Process A Process B Process C
Indirect Material 20,500 76,250 22,000
Electricity Expenses 6,250 12,500 10,750
Labour Charges 35,000 63,000 48,500
Overheads 33,250 64,250 53,750
Output (Units) 19,000 15,000 10,000
Output sold (Units) 3,000 3,000 3,000
Sale price units sold Rs. 20 Rs. 35 Rs.50
(Per unit)
Sale Price of units lost Rs.10 Rs. 15 Rs.20
(Per Unit)
You are required to prepare process cost accounts indicating clearly the profit or loss on units sold for each process.
For the purpose of this exercise abnormal loss, if any, may be charged to the respective stages since output of each stage can also be diverted to other process for manufacture of other chemicals.
Q 11: M/s. Uttam Workshop is producing a product which passes through two different processes. The by-product results out of the process and all of them are sold off directly from workshop. From the following particulars give ledger accounts of two processes and by-product accounts.
Process I / Process IIRaw materials (1000 tones) / 15,000
Wages / 12,500 / 11,280
Production overheads / 40% of prime cost / 50% of wages
Wastage / 10 tons / 20 tons
Sale of by-product / 50 tons at cost plus 10% / 30 tons at cost plus 20%
Q 12:
The following details are extracted from the costing records of an oil mill for
the three months ended 31st March, 1998.
Purchase of 500 tons of copra for Rs.2,00,000.
CrushingRs. / Refining
Rs. / Finishing
Rs.
Cost of labour / 2,500 / 1,000 / 1,500
Electric power / 600 / 360 / 240
Sundry Materials / 100 / 2,000
Repairs to machinery / 280 / 330 / 140
Steam / 600 / 450 / 450
Factory expenses / 1,320 / 660 / 220
Cost of casks / ----- / ----- / 7,500
300 tons of crude oil were produced.
250 tons of refined oil were produced.
248 tons of finished oil were delivered.
Copra sacks sold for Rs.400.
175 tons of copra residue sold for Rs.11,000.
Loss in weight in crushing 25 tons.
45 tons of by products obtained from refining process valued at Rs.6,750.
You are required to show the accounts in respect of each of the stages of manufacture for the purpose of arriving at the cost per ton of each process and the total cost per ton of finished oil.
Q 13:
A Ltd. produces product ‘AXE’ which passes through two processes before completed and transferred to finished stock.
The following data relate to October, 1997:-
ProcessParticulars / I / II / Finished Stock
Rs. / Rs. / Rs.
Opening stock / 7,500 / 9,000 / 22,500
Direct materials / 15,000 / 15,750 / -
Direct Wages / 11,200 / 11,250 / -
Factory overheads / 10,500 / 4,500 / -
Closing Stock / 3,700 / 4,500 / 11,250
Inter process profit included in opening stock / NIL / 1,500 / 8,250
Output of process I is transferred to process II at 25% profit on the transfer price.
Output of process II is transferred to finished stock at 20% profit on the transfer price. Stocks in process are valued at prime cost. Finished stock is valued at the price at which it is received from process II. Sales during the period are Rs.1,40,000.
You are required to prepare:-
Process cost accounts and finished goods account showing the profit element at each stage.
Q 14:
Product A passes through three process before it is transferred to finished stock. The following information is obtained for the month of July:-
Particulars / Process I / Process II / Process III /Process Stocks
Rs. / Rs. / Rs. / Rs.Opening Stock / 5,000 / 8,000 / 10,000 / 20,000
Direct Materials / 40,000 / 12,000 / 15,000 / -
Direct Wages
/ 35,000 / 40,000 / 35,000 / -Manufacturing Overheads / 20,000 / 24,000 / 20,000 / -
Closing Stock / 10,000 / 4,000 / 15,000 / 30,000
Profit % on transfer price to next process
/ 25% / 20% / 10% / -Profit included in opening stock / - / 1,395 / 2,690 / 6,534
Stocks in process are valued at prime cost and finished stock has been valued at the price at which it is received from process III. Sales during the period were Rs.4,00,000.
Prepare and compute:-
Process cost accounts showing profit element at each stage,
Actual realised profit, and
Stock valuation for Balance Sheet purpose.
Q 15:
Cheap Sweets Ltd. has divided its manufactures into two processes, A and B After
leaving process B, the product is passed into finished stock.
The output of process A is transferred to Process B at a price with gives process A a profit of 25% thereon, & the output of process B is transferred to finished goods at a price which gives process B a profit of 20% thereon.
The following information is provided in respect of the year ended 31st Dec. 1990:
Process A Process B
Stock on 1st Jan, 1990 Rs 3,200 2,000
Materials used 6,400 2,700
Direct Labour 12,500 8,500
Overheads 2,500 1,700
Stock on 31st Dec, 1990 2,100 900
Process stocks, consist of products which have passed through the process completely and are valued at prime cost to the process concerned.
Finished goods were in stock on 1st Jan 1990 to the value of Rs. 10,200 and on 31st Dec., 1990 to the value of Rs.6,200. Both opening and closing stocks were valued at the price at which they were transferred from process B.
Sales amounting to Rs 68,400 were effected during the year and included all the goods in stock at the beginning of the year.
The Reserves on 1st January, 1990 for unrealised profit included in stock valuation were Process B-350, Finished goods Rs 3,430.
Prepare the Process accounts, Finished goods a/cs and trading a/c for the year ended 31st Dec 1990.
Q 16: