Page 266 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes The process figures are:
process I (`) process II (`)

Materials consumed 3,000 1,500
Wages 3,500 2,000
Manufacturing expenses 1,000 1,000
5000 units were brought into process I costing ` 2,500. The outputs were:
process I 4,700 Units

process II 4,150 Units
prepare process cost accounts showing the cost of the output.
Solution:

Process Account I
Amount Amount
Particulars Units (`) Particulars Units (`)
(`) (`)
To Units brought in 5,000 2,500 By Normal wastage 250 20
To Materials consumed 3,000 By Abnormal wastage 50 105
To Wages 3,500 [(9,980÷4,750)x50]
To Manufacturing expenses 1,000 By Transfer to process II 4,700 9,875
5,000 10,000 5,000 10,000

Process Account II

Amount Units Amount
Particulars Units (`) Particulars
(`) (`) (`)
To Transferred from 4,700 9,875 By Normal wastage 470 47
process I
To Materials consumed 1,500 By Abnormal wastage 80 271
To Wages 2,000 [(14,328÷4,230)x80]
To Manufacturing expenses 1,000 By Finished stock 4,150 14,057
4,700 14,375 4,700 14,375

Example: The product of Ajay company passes through three distinct processes called
I, II and III respectively. From past experience, it is ascertained that wastage is incurred in each
process as under:
process I 2%
process II 5%

process III 10%
In each case, the percentage of wastage is computed on the number of units entering the process
concerned. The wastage of each process possesses a scrap value. The wastage of process I and II
is sold at ` 5 per 100 units and that of process III @ ` 20 per 100 units. The following information
is obtained for the month March, 2008:

260 LOVELY PROFESSIONAL UNIVERSITY