A producer of oils purchases 400 litres of oil at 75 per litre in containers of 40 litres each. Other expenses at the process were - 37,350…

CA Intermediate · Cost and Management Accounting · PYQS · January 2026
A producer of oils purchases 400 litres of oil at 75 per litre in containers of 40 litres each. Other expenses at the process were - 37,350 including an abnormal loss of 12,500 due to an accident. Normal waste at the process is 10%. Waste is sold at 10 per litre and each empty container is sold for 50. Generally, 10% of containers gets damaged so badly that they became unsalable. However, in the given situation, more containers were damaged and only 5 containers were in saleable condition. Actual output was 375 litres which is sold at a profit of 20% on cost. You are required to prepare Process Account and Income Statement.

Suggested Answer and Working Notes:

Process Account Particulars Container Oil Litre (₹) Particulars Container Oil Litre (₹) To Material @75 per litre 10 400 30,000 By Normal loss oil (10% of 400 litres) × 10per litre 40 400 To other Expenses (37,350-12,500) 24,850 By Normal loss Container 1 - To Abnormal gain (₹ 150 × 15 litres) 15 2,250 By Abnormal loss (Container) 4 200 By Sale of Container @50 per container 5 250 By Output (₹ 150 × 375 litres) 375 56,250 10 415 57,100 10 415 57,100 Cost per unit of completed units and abnormal gain: Total Cost-Realisable value from normal loss-Realisable value of Container / Inputs units-Normal loss units = (54,850 - 400 -450) / (400 litres-40 litres) = 54,000 / 360 litres = 150 per litre Income Statement Particulars (₹) Particulars (₹) To Cost of sales (₹ 150 × 375 litres) 56,250 By Sales 67,500 To Abnormal loss (Container) 200 By Abnormal gain {15 litres × (150 - 10)} 2,100 To Abnormal loss (accidental loss-given) 12,500 To Net Profit 650 69,600 69,600

Topics: Process & Operation Costing

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic