Aarav Industrial Resins Pvt. Ltd., headquartered in Ghaziabad, is engaged in manufacturing specialty chemicals used in the paints, laminates, and…

Aarav Industrial Resins Pvt. Ltd., headquartered in Ghaziabad, is engaged in manufacturing specialty chemicals used in the paints, laminates, and adhesives industry. The company operates a continuous two-stage production system. The company produces a base intermediate resin called "Phenolic Resin Base" in the first stage. This intermediate product can either: Be sold directly to small-scale manufacturers, or Be further processed into a higher-grade “Laminated Resin Compound”, which commands a better market price. Following stage 1 production data and cost data are given for the month just ended: Raw material input : 2,20,000 kg Opening Work-in-Progress : 50,000 kg (Materials 100% complete, Conversion 60% complete) Output transferred/sold : 1,70,000 kg Closing Work-in-Progress : 40,000 kg (Materials 100% complete, Conversion 70% complete) Normal process loss: 20% of Current input (Loss occurs due to evaporation and chemical reactions; no scrap value) Particulars Amount (₹) Raw Material Cost (Current Month) 88,000 Conversion Costs (Current Month) 1,20,000 Opening WIP – Material 25,000 – Conversion 15,000 The intermediate product can be sold in the open market at ₹1.80 per kg. Out of the total production, 50,000 kg were sold directly, while 1,20,000 kg were transferred to the second stage for further processing into a higher-grade product. The further processing details in the Finishing and Compounding Unit are as follows: In this stage, additional materials such as fillers and additives are introduced, resulting in an output where each kilogram of Phenolic Resin Base yields 2 kilograms of Laminated Resin Compound. The finished product is sold at ₹2.40 per kg in the market. The monthly costs incurred in Process II (other than the cost of Product ‘Phenolic Resin Base') are: Input Quantity (Base Resin) Material Cost (₹) Processing Cost (₹) 1,20,000 kg 1,50,000 1,30,000 1,60,000 kg (Full Capacity) 2,00,000 1,55,000 The management is currently evaluating operational efficiency and profitability decisions based on the above information: They are particularly interested in determining the cost per unit of the intermediate product, valuation of completed output and work-in-progress, profitability of further processing, and the feasibility of utilizing idle capacity in the second stage. The finance team has been asked to compute the following requirements (MCQs 1 to 5):