Page 257 - DCOM202_COST_ACCOUNTING_I

Unit 12: Process Costing and its Applications

Notes
Example: A product passes through three processes A, B and C. The following details are
obtained for its manufacture:
A B C

Raw materials introduced tons 250 152 145
Cost of per tons (`) 120 80 50
Direct wages (`) 85,800 20,250 10,560
Direct expenses (`) 13,800 13,870 2,250
Loss of Tonnage due to processing 4% 5% 2 ½%

Output transferred to next processes 20% 50% —
Transferred to warehouse 80% 50% 100%
prepare necessary process accounts.
Solution:

Process Account A

Particulars Tons Amount (`) Particulars Tons Amount (`)
To Materials 250 30,000 By Wastage (4%) 10
“ Direct wages 85,800 “ Process B (20%) 48 25,920
“ Direct expenses 13,800 “ Warehouse (80%) 192 1,03,680
250 1,29,600 250 1,29,600
Process Account B

Amount Amount
Particulars Tons Particulars Tons
(`) (`)
To process A a/c 48 25,920 By Wastage (5%) 10 --
“ Raw materials 152 12,160 “ Process C (50%) 95 36,100
“ Direct wages 20,250 “ Warehouse (50%) 95 36,100
“ Direct expenses 13,870
200 72,200 200 72,200

Process Account C
Amount Amount
Particulars Tons Particulars Tons
(`) (`)
To process B a/c 95 36,100 By Wastage (2.5%) 6 --
“ Raw materials 145 7,250 “ Warehouse (100%) 234 56,160
“ Direct wages 10,560
“ Direct expenses 2,250
240 56,160 240 56,160

Example: The products a manufacturing concern passes through two processes A and B,
and then to finished stock. It is ascertained that in each process 2% of the total weight put in is lost
and 5% scrap which from process A and B realises ` 100 per ton and ` 200 per ton respectively.
The Process figures are as follows:

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