COST ACCOUNTING

Problems on Process Accounting

Short Problems

1. Normal cost of normal output is Rs. 1,00,000.

Normal Output = 5,200 units
Abnormal loss = 200 units.
Find out the value of abnormal loss.

2. Calculate cost of abnormal loss from the figures given below. Normal output 9,000
units. Actual output 8,500 units. Normal cost of normal output Rs. 27,000.

3. From the following figures, compute abnormal gain :

Normal loss = 100 units
Normal output = 10,000 units
Actual output = 11,000 units
Normal cost of normal output = Rs. 20,000.

4. The following data are available with regard to production of product Z :

Material put in the process 600 kg @ Rs. 4 per kg.
Cost of labour Rs. 600.
Manufacturing overhead Rs. 300
The normal loss in process has been estimated at 10 %, half of which can be sold as
scrap at Rs. 2 per kg. The actual production obtained from the process is 560 kg.
Prepare the process accounts showing the cost per kg of the product.

5. In a factory 10,000 kgs of material was transferred from process I to process II at a

cost of Rs. 80,000. The following costs related to process II :
Rs.
Wages 6,000
Overheads 4,000
Sundry materials 2,000
In process II, 10 % of the input is normally lost. Actual output was 9,200 kgs.
Wastage fetches Rs. 2.00 per kg. Prepare process II account.

Main Problems

1. Product X is produced after three distinct processes. The following information is

obtained from the accounts of a period :
Items Total Process I Process II Process III
Direct Materials 2,200 1,800 300 100
Direct Wages 400 100 200 100
Direct Expenses 500 300 --- 200
Production overhead incurred is Rs. 800 and is recovered on 200 % of direct wages.
Production during the period was 100 kgs. There was no opening or closing stocks.
Prepare process cost accounts.
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2. A product passes through three stages of production and the product of each stage
becomes the raw material for the next stage. Further raw materials are also added at
each stage. During March 1983, 2,000 units of finished product were produced with
the following expenditure.

Stage A Stage B Stage C

Materials 20,000 16,000 8,000
Labour 16,000 24,000 12,000
Direct Expenses 1,200 2,000 800.

Indirect expenses amounted to Rs. 2,600. It is to be apportioned on the basis of labour.

Main raw materials issued to stage to stage (besides above) was worth Rs. 12,000.
Prepare the process cost account showing the cost per unit at each stage and the total
cost of finished product at the final stage.

3. A particular brand of phenyle passed through three important processes. During the
month of June 1983, 600 bottles were produced. The cost books show the following
information :

Process I Process II Process III

Materials 5,000 3,000 2,000
Labour 3,000 2,500 1,500
Direct Expenses 1,200 800 500
Cost of bottles Nil 2,300 Nil
Cost of corks Nil Nil 300

The indirect expenses for the period were Rs. 1,400. The by-product of process II was
sold for Rs. 200 and the residue of process III were sold for Rs. 120.
Prepare the accounts in respect of each process showing its cost and cost of production
of finished product per gross of bottles.

4. X Ltd., produces a patent material used in building, in the manufacturing of which three
processes are involved. The material is produced in three consecutive grades, namely,
soft, medium and hard. Figures relating to production for the first six months of 1988
are as follows :
Process I Process II Process III
Raw material used (tons) 1,000 --- ---
Cost per ton (Rs) 200 --- ---
Manufacturing wages and expenses 72,500 40,800 10,710
Weight lost 5% 10 % 20 %
Scrap (sold at Rs. 50 per ton) 50 tons 30 tons 51 tons

2/3rd of process I and one half of process II are passed to the next process and the
balance are sent to the warehouse for sale. You are required to prepare an account for
each process.
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5. Mysore Chemicals Ltd., produced three types of chemicals during the month of July by
three consecutive processes. In each process 2 % of the total weight put in is lost and
10 % is scrap. In process I and II scrap realize Rs. 100 a ton and from process III
Rs. 20 a ton.

Expenses Incurred Process I Process II Process III

1,000 tons 140 tons 1,348 tons
Raw Materials 1,20,000 28,000 1,07,840
Manufacturing wages 20,500 18,520 15,000
General Expenses 10,300 7,240 3,100
The product of three processes are dealt with as follows :
Process I Process II Process III
Passed to next process 75 % 50 % -----
Sent to warehouse for sale 25 % 50 % 100 %
Prepare process cost accounts showing cost per ton of each process.

6. Narmada Manufacturers process a product ‘Baby Food’ through three distinct

processes, the product of one process being passed on to the next process and so on to the
finished product intact. The following expenditure was incurred.
Process A (Rs) Process B (Rs) Process C (Rs)
Raw Materials 1,000 800 200
Labour 500 600 700
Direct Expenses 150 250 300

The overhead expenses for the period amounted to Rs. 3,600 and are to be distributed
to the process on the basis of labour. There was no stock in any of the processes at the
beginning or at the close of the period. Assuming that the output was 1,000 kgs, show
the process account A, B and C indicating also the unit cost per kilo under each
element of cost and the output in each process. If 10 % of the output is estimated to be
lost in the course of sale and sampling, what should be the selling price per unit so as to
provide for gross profit of 10 % on selling price.

7. The product of a manufacturing concern passes through two processes A and B and
then to finished stock. It is ascertained that in each process normally 5 % of the total
weight is lost and 10 % is scrap which from process A and B realizes Rs. 80 per ton
and Rs. 200 per ton respectively.
The following are the figures relating to both the processes.
Process A Process B
Materials in tons 1,000 70
Cost of materials per ton (Rs) 125 200
Wages (Rs) 28,000 10,000
Manufacturing expenses (Rs) 8,000 5,250
Output in tons 830 780
Prepare process accounts showing cost per ton of each process. There is no stock or
work in progress in any process.
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8. A product passes through two distinct processes A and B and then to finished stock.
The output of process A passes direct to B and that of B passes to finished product.
From the following information you are required to prepare accounts.
Process A (Rs) Process B (Rs)
Material consumed 12,000 6,000
Direct labour 14,000 8,000
Manufacturing Expenses 4,000 4,000
Input to process ‘A’ (units) 10,000
Input to process ‘A’ (value) 10,000
Output (units) 9,400 8,300
Normal loss (% of input) 5% 10 %
Value of normal loss (per 100 Units) 8 10
No opening or closing stock is held.

9. Make out the necessary accounts from the following details :

Process A Process B
Materials 30,000 3,000
Labour 10,000 12,000
Overheads 7,000 8,600
Inputs (units) 20,000 17,500
Normal loss 10 % 4%
Sale value of wastage per unit 1 2
There was no opening or closing stock or work in progress. Final output from process B
was 17,000 units.

10. A product passes through three processes. The following information is extracted from
cost records :
Particulars Process I Process II Process III
Materials introduced in units 1,000 550 500
Rate per unit 10.00 12.00 15.00
Labour cost 8,000 4,000 6,500
Overhead expenses 3,500 2,000 4,200
Normal process losses 5% 3% 5%
Sale of normal process loss per unit 3 5 2
Actual output units 950 1,400 1,675
Prepare process accounts showing clearly calculation of normal and abnormal losses or
gains if any.

11. A product passes through three processes A, B and C. 10,000 units at a cost of Re.1
were issued to Process A. The other expenses are :

Process A Process B Process C

Sundry Materials 1,000 1,500 1,480
Direct Labour 5,000 8,000 6,500
Direct Expenses 1,050 1,118 1,675
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The wastage of Process A was 5 % and Process B 4 %. The wastage of Process A

was sold at Re. 0.25 per unit and that of Process B at Re. 0.50 per unit and that of
Process C at Re. 1.00 per unit. The overhead charges are 168 % of direct labour.
The final product was sold at Rs. 10 per unit, fetching a profit of 20 % on sales. Find
the percentage of wastage in Process C.

12. Product ‘Z’ is obtained after it passes three distinct processes. The following information
is obtained from the accounts for the month ending December 1979 :

Item Total (Rs) Process I (Rs) Process II (Rs) Process III (Rs)
Direct
Materials 7,542 2,600 1,980 2,962
Direct
Wages 9,000 2,000 3,000 4,000
Production
Overhead 9,000

1,000 units at Rs. 3 each were introduced to Process I. There was no stock of material
or work in progress at the beginning or end of the period. The output of each process
passes direct to the next process and finally to finished stores. Production overhead is
recovered on 100 % of direct wages. The following additional data are obtained.

Process Output during the month Normal loss % of input Scrap Value
I 950 5% Rs. 2 per unit
II 840 10 % Rs. 4 Per unit
III 750 15 % Rs. 5 per unit
Prepare cost accounts and abnormal gain or loss accounts.

13. The product of a company passes through three distinct processes to completion. These
processes are known as A, B and C. From the past experience, it is ascertained that
wastage is incurred in each process as under :
Process A 2 % of input
Process B 3 % of input
Process C 10 % of input
The normal process loss occurring in the three processes is regularly sold at the rates of
50 paise (process A) Re. 1 (process B) and Rs. 2 (process C) per unit respectively.
The output of each process passes immediately to the next process and the finished
units are transferred from process C into finished stock. The following expenses were
incurred :
A B C
Material consumed 40,000 20,000 15,000
Direct Labour 42,000 42,600 35,000
Manufacturing Expenses 14,600 8,380 13,920
20,000 units have been issued to Process A at a cost of Rs. 80,000. The output from
each process has been as under :
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Process A 19,500 units

Process B 18,800 units
Process C 16,000 units.

There was no stock of work in progress in any process.

Prepare the process accounts and abnormal wastage account, assuming that the
abnormal wastage collected together for all the three processes was sold in one
lumpsum and fetched a price of Rs. 10,000.

14. A product passes through three processes -- P, Q and R.

The details of expenses incurred on the three processes during the year 1995 were as
under :
P Q R
Units issued 10,000
Rs. Rs. Rs.
Cost per unit 100 --- ---
Sundry materials 10,000 15,000 5,000
Labour 30,000 80,000 65,000
Direct Expenses 6,000 18,150 27,200
Sale price of output (per unit) 120 165 250

Management expenses during the year were Rs. 80,000 and selling expenses were
Rs. 50,000. These are not allocable to the proceesses.

Actual output of the three processes was : Process P -- 9,300 units; Process Q --
5,400 units; Process R -- 2,100 units.

2/3rd of the output of Process P and one half of the output of Process Q was passed on
to the next process and the balance was sold. The entire output of process R was sold.
The normal loss of the three processes, calculated on the input of every process was :
Process P -- 5 %; Process Q -- 15 % and Process R -- 20 %. The loss of Process P
was sold at Rs. 2 per unit, that of Process Q at Rs. 5 per unit and that of Process R
at Rs. 10 per unit. Prepare the three process accounts and the Profit and Loss Account.

15. The following details are extracted from the cost records of an oil mill for the year ended
31st March 1982.
Purchase of 5,400 tons of coconut for Rs. 2,20,000.
Crushing Refining Finishing
Cost of labour 2,750 1,100 1,650
Electricity 660 396 264
Sundry stores 110 2,200 ----
Repairs to machinery 308 363 154
Steam 660 495 495
Factory expenses 1,452 726 242
Cost of casks ---- ---- 8,250
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3,200 tons of crude oil were produced. 2,600 tons of oil were produced by the refining
process, 2,550 tons of refined oil were finished for delivery.

Coconut sacks sold Rs. 440

1,925 tons of coconut residue sold Rs. 12,100
Loss in weight in crushing 275 tons, 500 tons of by-products obtained from refining
process Rs. 7,425.
You are required to show the accounts in respect of each of the following stages of
manufacture for the purpose of arriving at the cost per ton of each process and the total
cost per ton of the finished oil.

16. An oil producing company maintains three processes. It introduced 600 kgs of coconut
worth Rs. 6,000 in the crushing process. The particulars of other expenses are as
follows :
Crushing (Rs) Refining (Rs) Finishing (Rs)
Labour 2,000 1,500 1,000
Power 500 300 100
Steam 200 100 50
Sundry materials 400 200 100
Factory expenses 600 500 300
Crude oil produced 400 kgs. Refined oil produced 300 kgs. Finished oil produced
280 kgs.
Cost of drums Rs. 2,000. Coconut sacks sold for Rs. 1,000. Copra residue 170 kgs,
sold for Rs.500. By-products in refining process 75 kgs sold for Rs. 40. Prepare
process accounts.

17. The information given below is extracted from the cost accounts of a factory producing a
commodity in the manufacture of which three processes are involved. Prepare process
cost accounts showing the cost of the output and the cost per unit at each stage of
manufacture. The value at which units are to be charged to processes two and three is
the cost per unit of processes one and two respectively.
(a) Wastages are normal and have no realizable value.
(b) Opening and closing stock represent units received from previous process on
which no further work has been done in the process concerned.
Process
I II III
Direct Wages 2,500 5,000 6,500
Machine Expenses 1,400 1,200 1,200
Factory on cost 1,100 1,550 900
Raw material consumed 8,000 ---- ----
Units Units Units
Production (gross) 2,750 ----- -----
Wastage 150 210 210
Stock on 1-1-1976 ---- 250 500
Stock on 31-1-1976 ---- 440
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18. From the following figures show the cost of the process of manufacture.
The production of each process on to the next process immediately on completion :
Process A Process B Process C
Wages and material (Rs) 30,400 12,000 29,250
Works overheads 5,600 5,250 6,000
Production in units 36,000 37,500 48,000
st
Stock on 1 July -- units
From preceding process ---- 4,000 16,500
st
Stock on 31 July -- units
From preceding process ---- 1,000 5,500