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Question
Product A is obtained after it passes through three distinct processes, I, II and III. The following information is obtained from the accounts for the month of March, 2018 :
| Particulars | Total(Rs.) | Process | ||
| I(Rs.) | II(Rs.) | III(Rs.) | ||
| Direct material | 15,084 | 5,200 | 3,960 | 5,924 |
| Direct wages | 18,000 | 4,000 | 6,000 | 8,000 |
| Production Overheads | 18,000 | |||
1,000 units at Rs. 6 each were introduced into Process I. There was no stock of material or work in progress at the beginning or at the end. The output of each process passes directly to the next process and finally to the finished stock. Production overhead is recovered at 100% of direct wages. The following additional data are obtained :
| Process | Output during the Month (Units) | Percentage of Normal Loss to Input | Value of Scrap per unit |
| I | 950 | 5% | Rs. 4 |
| II | 840 | 10% | Rs. 8 |
| III | 750 | 15% | Rs. 10 |
Prepare Process Accounts, Abnormal Loss Account and Abnormal Gain Account.
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Solution
Books of .............
| Dr. | Process - I Account | Cr. |
| Particulars | Quantity (Units) | Amount (Rs.) | Particulars | Quantity (Units) | Amount (Rs.) |
| To Units Introduced (1,000 x 6) | 1,000 | 6,000 |
By Normal Loss Alc `(1,000 "Units" xx5/100) (50 "Units" xx Rs. 4)`
|
50 | 200 |
| To Materials | - | 5,200 | By Process - II Alc | 950 | 19,000 |
| To Direct Wages | - | 4,000 | |||
| To Production Overheads (Rs. 4,000 x 100%) | - | 4,000 | |||
| 1,000 | 19,200 | 1,000 | 19,200 |
| Dr. | Process - II Account | Cr. |
| Particulars | Quantity (Units) | Amount (Rs.) | Particulars | Quantity (Units) | Amount (Rs.) |
| To process - I Alc | 950 | 19,000 |
By Normal Loss Alc `(950 "Units" xx10/100) (95 "Units" xx Rs. 8)`
|
95 | 760 |
| To Materials | - | 3,960 | By Abnormal Loss ( Working Note-1 | 15 | 600 |
| To Direct Wages | - | 6,000 | By Process - III Alc | 840 | 33,600 |
| To Production Overheads (Rs. 6,000 x 100%) | - | 6,000 | |||
| 950 | 34,960 | 950 | 34,960 |
| Dr. | Process - III Account | Cr. |
| Particulars | Quantity (Units) | Amount (Rs.) | Particulars | Quantity (Units) | Amount (Rs.) |
| To process - II Alc | 840 | 33,600 |
By Normal Loss Alc `(840 "Units" xx15/100) (126 "Units" xx Rs. 10)`
|
126 | 1,260 |
| To Materials | - | 5,924 | By Finished Stock Alc | 750 | 57,000 |
| To Direct Wages | - | 8,000 | |||
| To Production Overheads (Rs. 6,000 x 100%) | - | 8,000 | |||
| To Abnormal Gain Alc (Working Note-2) |
36 | 2,736 | |||
| 876 | 58,260 | 876 | 58,260 |
| Dr. | Abnormal Loss Alc | Cr. |
| Particulars | Quantity (Units) | Amount (Rs.) | Particulars | Quantity (Units) | Amount (Rs.) |
| To Process II Alc | 15 | 600 | By Bank Alc | 15 | 120 |
| By Costing P and L Alc | - | 480 | |||
| (Balancing Figure) | - | ||||
| 15 | 600 | 15 | 600 |
| Dr. | Abnormal Gain Alc | Cr. |
| Particulars | Quantity (Units) | Amount (Rs.) | Particulars | Quantity (Units) | Amount (Rs.) |
| To Normal Loss Alc (36 Units x Rs. 10) | 36 | 360 | By Process - III Alc | 36 | 2,736 |
| To Costin2 P and L Ale | - | 2,376 | |||
| 36 | 2,736 | 36 | 2,736 |
Working Notes :
(1) Calculation of Cost of Abnormal Loss in Process - II :
Quantity : 950 Units(-) 95 Units= 855 Units (Normal Output).
Amount: Rs. 34,960 (-) Rs. 760 = Rs. 34,200 (Normal Cost).
`therefore (15 "Units"xxRs. 34,200)/(855 "Units")= Rs. 600`
(2) Calculation of Cost of Abnormal Gain in Process - Ill :
Quantity: 840 Units(-) 126 Units = 714 Units (Normal Output)
Amount: Rs. 55,524 (-) Rs. l,260 = Rs. 54,264 (Normal Cost)
`therefore (36 "Units"xxRs. 54,264)/(714 "Units")= Rs. 2,736`
