As demand for LED light increases, more entrepreneurs are coming into its manufacturing process. eLED Pvt. Ltd. is also one of the recently formed…

CA Intermediate · Cost and Management Accounting · MTP · September 2024
As demand for LED light increases, more entrepreneurs are coming into its manufacturing process. eLED Pvt. Ltd. is also one of the recently formed company whose main business is related to LED lights. The company has extended its hand into various LED products like COB (Chip On Board) LEDs, SMD (Surface Mounted Device) LEDs, RGB LEDs, Flashing LEDs, Miniature LEDs, OLEDs, Filament Bulbs, etc. However, at the beginning stage, the company has decided to only assemble the products and enter into manufacturing stage at later years. The details relating to the first process of mounting for the month of August are given below: Opening Work-in-Process: 31,000 unitsMaterial - 12,40,000Labour - 2,32,500Overheads - 6,97,500Introduction during the process: 5,89,000 unitsMaterial - 2,29,40,000Labour - 55,64,500Overheads - 1,66,93,500 The process involve some wastage as well. The management estimated a normal loss of 5% of total input including opening work-in-process which can be sold out for 20 per unit. However, the workers reported 46,500 units as scrapped in which 100% material was used along with 80% of Labour and overheads. 5,42,500 units were transferred for next process of soldering. Some units were still in process and thus, shifted for the next month process of mounting. With 100% material used along with 80% labour and overheads, 31,000 units were shifted. Following the average method of inventory, you are required to PREPARE: Statement of cost showing cost per equivalent unitStatement of distribution costProcess Account (Mounting)Normal Loss Account and Abnormal Loss Account.

Suggested Answer and Working Notes:

(i) Statement of Equivalent Production Particulars Input Units Particulars Output Units Equivalent Production Material Labour & O.H. % Units % Units Opening WIP 31,000 Completed and transferred to Process (Soldering) 5,42,500 100 5,42,500 100 5,42,500 Units introduced 5,89,000 Normal Loss (5% of 6,20,000) 31,000 - - - - Abnormal loss (Balancing figure) 15,500 100 15,500 80 12,400 Closing WIP 31,000 100 31,000 80 24,800 6,20,000 6,20,000 5,89,000 5,79,700 Statement showing cost for each element Particulars Materials (₹) Labour (₹) Overhead (₹) Total (₹) Cost of opening work-in-process 12,40,000 2,32,500 6,97,500 21,70,000 Cost incurred during the month 2,29,40,000 55,64,500 1,66,93,500 4,51,98,000 Less: Realisable Value of normal scrap (₹ 20 × 31,000 units) (6,20,000) - - (6,20,000) Total cost: (A) 2,35,60,000 57,97,000 1,73,91,000 4,67,48,000 Equivalent units: (B) 5,89,000 5,79,700 5,79,700 Cost per equivalent unit: (C) = (A ÷ B) 40.00 10.00 30.00 80.00 (ii) Statement of Distribution of cost Amount (₹) Amount (₹) 1. Value of units completed and transferred (5,42,500 units × ₹ 80) 4,34,00,000 2. Value of Abnormal Loss: - Materials (15,500 units × ₹ 40) 6,20,000 - Labour (12,400 units × ₹ 10) 1,24,000 - Overheads (12,400 units × ₹ 30) 3,72,000 11,16,000 3. Value of Closing W-I-P: - Materials (31,000 units × ₹ 40) 12,40,000 - Labour (24,800 units × ₹ 10) 2,48,000 - Overheads (24,800 units × ₹ 30) 7,44,000 22,32,000 Total 4,67,48,000 (iii) Process Account (Mounting) Particulars Units (₹) Particulars Units (₹) To Opening W.I.P: By Normal Loss (₹ 20 × 31,000 units) 31,000 6,20,000 Materials 31,000 12,40,000 By Abnormal loss 15,500 11,16,000 Labour 2,32,500 By Process A/c (Soldering) 5,42,500 4,34,00,000 Overheads 6,97,500 By Closing WIP 31,000 22,32,000 To Materials introduced 5,89,000 2,29,40,000 To Direct Labour 55,64,500 To Overheads 1,66,93,500 6,20,000 4,73,68,000 6,20,000 4,73,68,000 (iv) Normal Loss A/c Particulars Units (₹) Particulars Units (₹) To Process Account (Mounting) 31,000 6,20,000 By Cost Ledger Control A/c 31,000 6,20,000 31,000 6,20,000 31,000 6,20,000 Abnormal Loss A/c Particulars Units (₹) Particulars Units (₹) To Process Account (Mounting) 15,500 11,16,000 By Cost Ledger Control A/c 15,500 3,10,000 By Costing Profit & Loss A/c 8,06,000 15,500 11,16,000 15,500 11,16,000

Topics: Process & Operation Costing

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