Page 269 - DCOM202_COST_ACCOUNTING_I

Unit 13: Normal Wastage, Abnormal Loss and Abnormal Gain

Notes
Example: The products Ltd. manufactures and sells their chemicals produced by
consecutive process:
The products of three processes are as under:

process I (`) process II (`) process III (`)
Transferred to next process 66 % 60% —
Transferred to warehouse for sale 33 % 40% 100%
In each process, 4% of the total weight put is lost and 6% is scrap, which from process I realises
` 3 per ton, from process II ` 5 per ton and from process III ` 6 per ton. The following particulars
relate October, 2005:
Raw materials used:

process I 1,400 tons @` 10 per ton
process II 160 tons @ ` 16 per ton
process III 1,260 tons @ ` 7 per ton
Manufacturing wages and expenses:
process I ` 5,152

process II ` 3,140
process III ` 2,895
prepare process accounts showing the cost per ton of each product.
Solution:

Process Account I

Amount Amount
Particulars Tons Particulars Tons
(`) (`)
To Materials 1,400 14,000 By Loss in weight 56 --
“ Wages 5,152 “ Sale of scrap 84 252
“ Transfer to Warehouse 420 6,300
“ Process II (cost per ton 840 12,600
` 15)
1,400 19,152 1,400 19,152

Process Account II
Amount Amount
Particulars Tons Particulars Tons
(`) (`)
To Transferred from 840 12,600 By Loss in weight 40 --
process I a/c “ Sale of scrap 60 300

“ Materials 160 2,560 “ Transfer to Warehouse 360 7,200
“ Wages 3,140 “ Transfer to Process III 540 10,800
(cost per ton ` 20)
1,000 18,300 1,000 18,300

LOVELY PROFESSIONAL UNIVERSITY 263