Seema Ltd. is known for its two-stage production process, which is as follows: Process A: Raw wool is converted into premium woollen thread. Process…

CA Intermediate · Cost and Management Accounting · MTP · January 2026
Seema Ltd. is known for its two-stage production process, which is as follows: Process A: Raw wool is converted into premium woollen thread. Process B: Woollen threads are further refined to create luxurious woollen garments. Following data is given for the quarter ended March 2025: Particulars Process A Process B Opening work-in-progress 2,000 units Nil Material 4,50,000 — Labour & Overheads 1,44,000 — Costs incurred during the quarter: Material 18,00,000 6,87,500 Labour & Overheads 5,70,000 — Other material — 30,25,000 Units of production: Received in process 8,000 units 5,500 units Completed units 7,000 units 5,500 units Completed units transferred to next process 5,500 units — Completed units sold in the market 1,500 units 5,500 units Closing work-in-progress 1,500 units Nil Normal loss in process 10% of the total input (including opening WIP) Nil Additional Information: Normal loss units are sold at a realizable value of 90 per unit.Any loss beyond normal loss is considered 100% complete in respect of material and labour & overheads.In the market, woollen garments and remaining woollen threads were sold at 20% markup on the cost price.Degree of Completion: Process A Particulars Material Labour & Overheads Opening work-in-progress 100% 50% Closing work-in-progress 100% 60% Using Weighted Average Method, you are required to PREPARE: (i) Statement of equivalent production of Process A. (ii) Statement showing cost for each element of Process A. (iii) Statement of distribution of cost of Process A. (iv) Statement showing sale proceeds of each of the product woollen thread and woollen garments along-with total sale proceeds of Seema Ltd. during the specified period.

Suggested Answer and Working Notes:

(i) Statement of equivalent production: Process A Particulars Input Units Particulars Output Units Equivalent Production Material Labour & OH % Units % Units Opening WIP 2,000 Completed Units 7,000 100 7,000 100 7,000 Units Introduced 8,000 Normal Loss [(2,000+8,000) x 10%] 1,000 -- -- -- -- Abnormal Loss (Bal. Fig.) 500 100 500 100 500 Closing WIP 1,500 100 1,500 60 900 Total 10,000 Total 10,000 9,000 8,400 (ii) Statement showing cost for each element: Process A Particulars Material Labour & OH Total Cost of Opening WIP 4,50,000 1,44,000 5,94,000 Cost of Completed Units 18,00,000 5,70,000 23,70,000 Less: Realizable Value (1,000 x 90) (90,000) — (90,000) Total Cost 21,60,000 7,14,000 28,74,000 Equivalent Units 9,000 8,400 Cost per EQ Unit 240 85 325 (iii) Statement of distribution of cost: Process A Particulars EQ Units Cost per EQ Unit Amount Completed Units 7,000 325 22,75,000 Abnormal Loss 500 325 1,62,500 Closing WIP: Material 1,500 240 3,60,000 Labour & Overheads 900 85 76,500 4,36,500 (iv) Sale proceeds of WR fabrics: Out of 7,000 units of Process A (woolen threads), only 5,500 units were further processed in Process B and sold as woolen garments. Thus balance 1,500 units of woolen threads were sold in the market. Units Selling price p.u. (Refer Working note) Amount in Rs. Process A 1,500 390 5,85,000 Woolen Threads: Process B: Woolen Garments 5,500 1,200 66,00,000 Total Sales 71,85,000 Working Notes: Further Processing: Process B Particulars Units Computation Amount Transferred from Process A 5,500 5,500 x 325 17,87,500 Material 30,25,000 Labour & Overheads 6,87,500 Total 5,500 55,00,000 Woolen Garment Cost per Unit = 55,00,000/5,500 = 1,000 Sale Price of Woolen Thread = 325 per unit + 20% = 390 per unit Sale Price of Woolen Garment = 1,000 per unit + 20% = 1,200 per unit

Topics: Process & Operation Costing

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