Hawtt Veel is a renowned brand of HV Ltd. which manufactures toy car. The manufacturing process of the toy cars at first involve designing the…

CA Intermediate · Cost and Management Accounting · MTP · January 2025
Hawtt Veel is a renowned brand of HV Ltd. which manufactures toy car. The manufacturing process of the toy cars at first involve designing the parts, creating the mold and then simultaneously melting the plastic. As the mold created last year is being used as it is for the current year, the first process involves only melting the plastic (Process I). The next process is about injecting the plastic into the mold and assembling the parts formed (Process II). During the month of April, the materials for 1,20,000 toy cars were put through Process I of which melting process were completed for 90,000 toy cars only before transferring to Process II. The costs incurred in Process I are as follows: Direct material - 22,50,000Direct wages - 27,00,000Factory overheads - 18,00,000 Degree of completion for those not transferred to Process II is as follows: Materials 100%Labour and overheads 50% Out of those transferred to Process II for injecting and assembling, 84,000 units of toy car were completed and transferred to finished goods store for protective packing. The process of protective packing is done at the end of the Process II and the costs incurred are as follows: Packing materials - 6,00,000Direct wages - 5,25,000Factory overheads - 6,75,000 There was a normal loss of 600 units in Process II with no salvage value. Some units were still in progress under Process II and thus, shifted for the next month process. The degree of completion for those not transferred to finished goods store is as follows: Materials 100%Labour and overheads 25% You are required to PREPARE- (i) Statement of Equivalent Production, Cost per unit and Process I A/c. (ii) Statement of Equivalent Production, Cost per unit and Process II A/c.

Suggested Answer and Working Notes:

(i) Process I - Statement of Equivalent Production Particulars Completed Units Closing stock of WIP Equivalent Production units Units % of Completion Equivalent Units (1) + (2) Material 90,000 30,000 100% 30,000 1,20,000 Wages 90,000 30,000 50% 15,000 1,05,000 Overhead 90,000 30,000 50% 15,000 1,05,000 Process I Particulars Process Cost (₹) (1) Equivalent Production (units) (2) Process Cost p.u. (₹) (2)/(3) WIP stock Equivalent units (4) Cost of WIP Stock (₹) (4) x (5) Transfer to Process II (₹) (2)-(6) Material 22,50,000 1,20,000 18.750 30,000 5,62,500 16,87,500 Wages 27,00,000 1,05,000 25.714 15,000 3,85,714 23,14,286 Overhead 18,00,000 1,05,000 17.143 15,000 2,57,143 15,42,857 67,50,000 12,05,357 55,44,643 Process I A/c Particulars Unit (₹) Particulars Units (₹) To Direct material 1,20,000 22,50,000 By Process II A/c 90,000 55,44,643 To Direct wages - 27,00,000 By Closing W-I-P 30,000 12,05,357 To Factory overhead - 18,00,000 1,20,000 67,50,000 1,20,000 67,50,000 (ii) Process II - Statement of Equivalent Production Particulars Completed Units Closing stock of WIP Equivalent Production units Units % of Completion Equivalent Units (1) + (2) Material 84,000 5,400* 100% 5,400 89,400 Wages 84,000 5,400 25% 1,350 85,350 Overhead 84,000 5,400 25% 1,350 85,350 *(90,000 - 84,000 - 600) units = 5,400 units Process II Particulars Process Cost (₹) (1) Equivalent Production (units) (2) Process Cost p.u. (₹) (2)/(3) WIP stock Equivalent units (4) Cost of WIP Stock (₹) (4) x (5) Transfer to Finished Stock (₹) (2)-(6) Material 55,44,643 89,400 62.021 5,400 3,34,911 52,09,732 Wages 5,25,000 85,350 6.151 1,350 8,304 5,16,696 Overhead 6,75,000 85,350 7.909 1,350 10,677 6,64,323 67,44,643 3,53,892 63,90,751 Add: Packing Material Cost 6,00,000 Cost of Finished Stock 69,90,751 Process II A/c Particulars Units (₹) Particulars Units (₹) To Process I 90,000 55,44,643 By Finished Stock 84,000 69,90,751 To Direct wages - 5,25,000 By Normal loss 600 - To Factory overhead - 6,75,000 By WIP stock 5,400 3,53,892 To Packing charges - 6,00,000 90,000 73,44,643 90,000 73,44,643

Topics: Process & Operation Costing

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