PR Ltd., a leading chemical company specializing in the production of specialty chemicals and industrial products, manufactures Product X through…

CA Intermediate · Cost and Management Accounting · MTP · May 2025
PR Ltd., a leading chemical company specializing in the production of specialty chemicals and industrial products, manufactures Product X through two distinct processes Process-l and Process-II. Known for its innovation in chemical manufacturing, the company uses advanced technologies and industry best practices to ensure high-quality production. The following information is provided from the books of account for the year: Particulars Process- I Process- II Raw materials used 1,50,000 units - Raw materials cost per unit 400 Actual Output 1,38,000 units 96,000 units Output transferred to next process 3/4th Output sold 1/4th 96,000 units Normal loss (on inputs) 6% 10% Direct wages 39,00,000 58,50,000 Direct Expenses 20% of Direct wages 15% of Direct wages Manufacturing overheads 2,25,00,000 to be recovered as a percentage of direct wages Realisable value of scrap per unit 25 40 Selling price per unit of output 650 950 Management & Selling expenses of 1,27,50,000 are directly attributable to the Costing Profit & Loss Account. You are required to PREPARE the following: (i) Process-l Account (ii) Process-II Account (iii) Abnormal Loss (iv) Abnormal Gain Account (v) Costing Profit & Loss Account

Suggested Answer and Working Notes:

Process- I A/c Particulars Units (₹) Particulars Units (₹) To Raw material used (₹ 400 × 1,50,000 units) 1,50,000 6,00,00,000 By Normal loss (6% of 1,50,000 units) × ₹ 25 9,000 2,25,000 To Direct wages 39,00,000 By Process- II A/c (₹ 520.96 × 1,03,500 units) 1,03,500 5,39,19,360 To Direct expenses (20% of Direct wages) 7,80,000 By Abnormal loss (₹ 520.96 × 3,000 units) 3,000 15,62,880 To Manufacturing overheads [2,25,00,000 × (390/975)] 90,00,000 By Costing Profit and Loss (P&L) 34,500 1,79,72,760 1,50,000 7,36,80,000 1,50,000 7,36,80,000 Cost per unit: (Total Cost - Realisable value of normal loss) / (Total input units - Normal Loss units) = (₹ 7,36,80,000 -2,25,000) / (1,50,000 units - 9,000 units) = 520.96 per unit Process- II A/c Particulars Units (₹) Particulars Units (₹) To Process- I A/c 1,03,500 5,39,19,360 By Normal loss (10% of 1,03,500 units) × ₹ 40 10,350 4,14,000 To Direct wages 58,50,000 By Costing P & L A/c 96,000 7,59,88,778 To Direct expenses (15% of Direct wages) 8,77,500 To Manufacturing overhead (2,25,00,000 × (585/975)) 1,35,00,000 Cost per unit: (Total Cost - Realisable value of normal loss) / (Total input units - Normal Loss units) = (₹ 7,41,46,860 -4,14,000) / (1,03,500 units - 10,350 units) = 791.55 per unit Abnormal Loss A/c Particulars Units (₹) Particulars Units (₹) To Process- I A/c 3,000 15,62,880 By Bank 3,000 75,000 By Costing P & L A/c 14,87,880 3,000 15,62,880 3,000 15,62,880 Abnormal Gain A/c Particulars Units (₹) Particulars Units (₹) To Normal Loss 2,850 1,14,000 By Process- II A/c 2,850 22,55,918 To Costing P & L A/c 21,41,918 2,850 22,55,918 2,850 22,55,918 Costing Profit & Loss Account Particulars (₹) Particulars (₹) To Cost of sales 9,39,61,538 By Sales Process I- 1,79,72,760 Process I- 34,500 @ 650 11,36,25,000 Process II- 7,59,88,778 Process II- 96,000 @ 950 To Abnormal loss 14,87,880 By Abnormal gain 21,41,918 To Selling Expenses 1,27,50,000 To Net Profit 75,67,500 11,57,66,918 11,57,66,918

Topics: Process & Operation Costing

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