A Company produces a component, which passes through two processes. During the month of April, 2025, materials for 40,000 components were put into…

CA Intermediate · Cost and Management Accounting · RTP · May 2026
A Company produces a component, which passes through two processes. During the month of April, 2025, materials for 40,000 components were put into Process I of which 30,000 were completed and transferred to Process II. Those not transferred to Process II were 100% complete as to materials cost and 50% complete as to labour and overheads cost. The Process I costs incurred were as follows: Particulars ₹ Direct Materials 15,000 Direct Wages 18,000 Factory Overheads 12,000 Of those transferred to Process II, 28,000 units were completed and transferred to finished goods stores. There was a normal loss with no salvage value of 200 units in Process II. There were 1,800 units, remained unfinished in the process with 100% complete as to materials and 25% complete as regard to wages and overheads. No further process material costs occur after introduction at the first process until the end of the second process, when protective packing is applied to the completed components. The process and packing costs incurred at the end of the Process II were: Particulars ₹ Packing Materials 4,000 Direct Wages 3,500 Factory Overheads 4,500 Required: (i) PREPARE Statement of Equivalent Production, Cost per unit and Process I A/c. (ii) PREPARE statement of Equivalent Production, Cost per unit and Process II A/c.

Suggested Answer and Working Notes:

Process I Statement of Equivalent Production and Cost Input (Units) Particulars Output Units Equivalent Production Materials Labour Overheads (%) Units (%) Units (%) Units 40,000 Completed 30,000 100 30,000 100 30,000 100 30,000 Closing WIP 10,000 100 10,000 50 5,000 50 5,000 40,000 40,000 40,000 35,000 35,000 Particulars Materials Labour Overhead Total Cost incurred (₹) 15,000 18,000 12,000 45,000 Equivalent units 40,000 35,000 35,000 Cost per equivalent unit (₹) 0.3750 0.5143 0.3428 1.2321 Process- I Account Particulars Units (₹) Particulars Units (₹) To Materials 40,000 15,000 By Process-II A/c 30,000 36,964 To Direct Wages 18,000 By Closing WIP 10,000 8,036* To Overhead 12,000 40,000 45,000 40,000 45,000 * (Material 10,000 units × ₹ 0.3750) + (Labour 5,000 units × 0.5143) + (Overheads 5,000 units × ₹ 0.3428) = 3,750 +2,572 +1,714 = 8,036 Process II Statement of Equivalent Production and Cost Input (Units) Particulars Output Units Equivalent Production Materials Labour Overheads (%) Units (%) Units (%) Units 30,000 Completed 28,000 100 28,000 100 28,000 100 28,000 Normal loss 200 -- -- -- -- -- -- WIP 1,800 100 1,800 25 450 25 450 30,000 30,000 29,800 28,450 28,450 Particulars Materials Labour Overhead Total Process-I Cost 36,964 -- -- 36,964 Cost incurred (₹) 4,000 3,500 4,500 8,000 Equivalent units 29,800 28,450 28,450 Cost per equivalent unit (₹) 1.2404 0.1230 0.1582 1.5216 Process- II Account Particulars Units (₹) Particulars Units (₹) To Process-I A/c 30,000 36,964 By Normal loss A/c 200 To Packing Material 4,000 By Finished Goods Stock A/c 28,000* 46,605 To Direct Wages 3,500 By Closing WIP 1,800** 2,359 To Factory Overhead 4,500 48,964 48,964 *28,000 × ₹ 1.5216 = 42,605 +4,000 (Packing Material Cost) = 46,605 **1,800 units × 1.2404 + 450 units × (₹ 0.1230 + 0.1582) = 2,359

Topics: Process & Operation Costing

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