AquaPaints Ltd. is engaged in the manufacturing of water-based paints for the construction industry. The production is carried out in a continuous…

CA Intermediate · Cost and Management Accounting · MTP · May 2026
AquaPaints Ltd. is engaged in the manufacturing of water-based paints for the construction industry. The production is carried out in a continuous process, and the company uses the FIFO method to value work-in-process and finished goods. Due to a system failure during the previous month, part of the production data was lost. However, some key information was recovered, and the management has approached you to help prepare the process account for the affected month. The following details were retrieved: Opening work-in-process: 1,200 litres, 50% complete for mixing labour, and 40% complete for utilities overheads. This WIP was valued at 36,000.Closing work-in-process: 250 litres, 30% complete for mixing labour, and 20% complete for utilities overheads.Normal process loss: 6% of total input. Actual loss during the month was 1,500 litres, partly due to equipment malfunction.Finished output transferred: 5,000 litres.Scrap value of normal loss:12 per litre.All color pigments and base chemicals are added at the start of the process.The cost per equivalent litre for the month was: Cost Element Rate (₹) Base Chemicals 21.00 Mixing Labour 6.00 Utilities Overheads 8.00 Total 35.00 (a) DETERMINE the quantity (in litres) of base chemicals input during the month. (b) CALCULATE the normal loss and abnormal loss or gain for the period. (c) COMPUTE the total cost of base chemicals, mixing labour, and utilities overheads added during the month. (d) PREPARE the Process Account for the month.

Suggested Answer and Working Notes:

(a) Calculation of Base Chemicals Input During the Month: Quantities Entering Process Litres Quantities Leaving Process Litres Opening WIP 1,200 Transfer to Finished Goods 5,000 Base Chemicals Input (Bal. Fig.) 5,550 Process Losses 1,500 Closing WIP 250 Total Input 6,750 Total Output 6,750 (b) Calculation of Normal Loss and Abnormal Loss/Gain Normal Loss = 6% of Total Input= 6% of 6,750 = 405 litresActual Loss = 1,500 litresAbnormal Loss = 1,500 – 405 = 1,095 litres (Abnormal Loss) (c) Calculation of Values of Base Chemicals, Labour, and Overheads Added Cost Element Rate per Litre (₹) Equivalent Units (Ltr) Total Cost (₹) Base Chemicals 21 5,145 1,08,045 Mixing Labour 6 5,570 33,420 Utilities Overheads 8 5,665 45,320 Subtotal 1,86,785 Add: Scrap value of Normal Loss (405 x 12) 4,860 Total Cost Added to Process 1,91,645 Workings: Statement of Equivalent Units (Litres) Input Details Units Output details Units Equivalent Production Material Units (%) Labour Units (%) Overheads Units (%) Opening WIP 1,200 Units completed: From Opening WIP 1,200 -- 600 (50%) 720 (60%) Fresh inputs introduced 5,550 From fresh units 3,800 3,800 (100%) 3,800 (100%) 3,800 (100%) Normal loss 405 Abnormal loss 1,095 1,095 (100%) 1,095 (100%) 1,095 (100%) Closing WIP 250 250 (100%) 75 (30%) 50 (20%) 6,750 6,750 5,145 5,570 5,665 (d) Process Account for the Month Particulars Litres Amount (₹) Particulars Litres Amount (₹) To Opening WIP 1,200 36,000 By Finished Goods (Output) 5,000 1,78,360 To Base Chemicals 5,550 1,12,905 By Normal Loss (405 x 12) 405 4,860 To Mixing Labour 33,420 By Abnormal Loss (1,095 x 35) 1,095 38,325 To Utilities Overheads 45,320 By Closing WIP 250 6,100 Total 6,750 2,27,645 Total 6,750 2,27,645 Working Note: Complete cost of 1,200 litres of opening W-I-P = 45,360 Cost of units introduced and completely processed units = 3,800 x 35 = 1,33,000 Cost of 5,000 completed units = 45,360 + 1,33,000 = 1,78,360 Abnormal Loss = 1,095 x 35 = 38,325 Closing W-I-P: Material: 250 x 21 = 5,250Labour: 75 x 6 = 450Overheads: 50 x 8 = 400Total: 6,100 Cost of material added: Base chemical: 1,08,045Add: Realisable value of Scrap: 4,200Total: 1,12,905

Topics: Process & Operation Costing

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