Question

ABC Limited manufactures a product ‘2X’ by using the process normally R. T. for the month of

May 2015, the following data is available. 30 Process R. T.

Material Introduced 16,000 units

Transfer to next process 14,000 units

Work-in-Process 4,000 units

At the beginning of the month (4/5 completed) 3,000 units

At the end of the month(2/3 completed)

Cost records:

Work-n-Process at the beginning of the month Material Rs. 30,000

Conversion cost Rs. 29,200

Cost during the month

Materials Rs. 1,20,000

Conversion 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. Materials 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: Prepare a cost of production report.

Answer 1

PROCESS A/C

	Units	Amount		Units	Amount
To Op. Wip	3,000	59,200	By Normal loss	1,400	-
To Raw Material	16,000	120,000	By Output (w.n.1)	14,000	282,850
To Conversion cost	-	160,800	By Closing wip (w.n.2)	4,000	65,230
To Ab. Gain (bal) (w.n.3)	400	8,080
	19,400	348,080		19,400	348,080

STATEMENT OF EQUIVALENT UNITS (Avg. Method)

Particulars	Units	Raw Material	Conversion cost
Output	14,000	14,000	14,000
Closing Wip	4,000	4,000	2,667 (2/3)
Ab. Gain	(400)	(400)	(400)
Normal loss	1,400	-	-
Total Units(A)	19,000	17,600	16,267
Cost:
Opening wip		30,000	29,200
Current month		120,000	160,800
Total cost(B)		150,000	190,000
Cost per unit (B/A)		8.52	11.68

W.N.1 - Value of Output

R.M. 14,000 units x Rs.8.52 = 119,318

C.C. 14,000 units x Rs.11.68 = 163,521

Total cost = Rs. 282,839 Rounded off to Rs.282,850.

W.N. 2 - Value of Closing Wip

R.M. 4,000 units x Rs.8.52 = 34,080

C.C. 2,667 units x Rs.11.68 = 31,150

Total cost = 65,230.

W.N. 3 - Value of Abnormal Gain

R.M. 400 units x Rs.8.52 = 3,408

C.C. 400 units x Rs.11.68 = 4,672

Total cost = Rs.8,080.