A company produces a component, which passes through two processes. During the month of November, 2025, materials for 40,000 components were put…
CA Intermediate · Cost and Management Accounting · RTP · September 2026
A company produces a component, which passes through two processes. During the month of November, 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: Direct Materials ₹3,00,000 Direct Wages ₹3,50,000 Factory Overheads ₹2,45,000 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. Costs incurred in Process-II are as follows: Packing Materials ₹80,000 Direct Wages ₹71,125 Factory Overheads ₹85,350 Packing material cost is incurred at the end of the second process as protective packing to the completed units of production. 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 (₹) 3,00,000 3,50,000 2,45,000 8,95,000 Equivalent units 40,000 35,000 35,000 Cost per equivalent unit (₹) 7.50 10.00 7.00 24.50 Process-I Account Particulars Units (₹) Particulars Units (₹) To Materials 40,000 3,00,000 By Process-II A/c (30,000 units × ₹24.5) 30,000 7,35,000 To Labour 3,50,000 By Closing WIP* 10,000 1,60,000 To Overhead 2,45,000 40,000 8,95,000 40,000 8,95,000 * (Material 10,000 units × ₹7.5) + (Labour 5,000 units × ₹10) + (Overheads 5,000 units × ₹7) = ₹75,000 + ₹50,000 + ₹35,000 = ₹1,60,000 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 — — — — — — Closing 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 7,35,000 — — 7,35,000 Cost incurred (₹) — 71,125 85,350 1,56,475 Equivalent units 29,800 28,450 28,450 Cost per equivalent unit (₹) 24.6644 2.5000 3.0000 30.1644 Process-II Account Particulars Units (₹) Particulars Units (₹) To Process-I A/c 30,000 7,35,000 By Normal loss A/c 200 — To Packing Material 80,000 By Finished Goods Stock A/c 28,000* 9,24,604 To Direct Wages 71,125 By Closing WIP** 1,800 46,871 To Factory Overhead 85,350 30,000 9,71,475 30,000 9,71,475 * 28,000 × ₹30.1644 = ₹8,44,603 + ₹80,000 (Packing Material Cost) = ₹9,24,604 ** 1,800 units × ₹24.6644 + 450 units × (₹2.5 + ₹3) = ₹46,871
Topics: Process & Operation Costing
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