Question

Problem 5.4: Process Cost example with Normal Loss, Abnormal Loss, Abnormal Galli The following information is available about process B. 20000 units were transferred to process B @ Rs. 4 per unit. Normal loss in the production process is estimated @ 10% of process input. Output of process B is transferred to finished stock account. Amount (Rs. '000) Particulars Labor Cost 1000 Materials 4000 Proportionate share of factory overhead 700 You are required to prepare the process cost account for process B under each of the following 3 independent scenarios: a) Actual Production is 1800 units b) Actual Production is 1700 units Actual Production ie 1000 unite

Answer 1

a) Actual production is 18000 units (in the question it is given 1800 units but it should be 18000 units)
	Process B account
	Particulars	Quantity	Amount	Particulars	Quantity	Amount
	To input from process A	20000	80000	By normal loss	2000	8000
	To Labor		100000	By output transferred to finished goods	18000	4872000
	To Materials		4000000
	To factory overhead		700000
		20000	4880000		20000	4880000
b) Actual production is 17000 units (in the question it is given 1700 units but it should be 17000 units)
	Process B account
	Particulars	Quantity	Amount	Particulars	Quantity	Amount
	To input from process A	20000	80000	By normal loss	2000	0
	To Labor		100000	By Abnormal loss A/c (1000 units * Rs. 271.11)	1000	271110
	To Materials		4000000	By output transferred to finished goods	17000	4608890
	To factory overhead		700000
		20000	4880000		20000	4880000
	Abnormal loss = Total cost / (Input - normal loss) = 4880000 / (20000 - 2000) = Rs. 271.11
c) Actual production is 19000 units (in the question it is given 1900 units but it should be 19000 units)
	Process B account
	Particulars	Quantity	Amount	Particulars	Quantity	Amount
	To input from process A	20000	80000	By normal loss	2000	0
	To Labor		100000
	To Materials		4000000	By output transferred to finished goods	19000	5151110
	To factory overhead		700000
	To Abnormal gain A/c (1000 units * Rs. 271.11)	1000	271110
		21000	5151110		21000	5151110
	Abnormal gain = Total cost / (Input - normal loss) = 4880000 / (20000 - 2000) = Rs. 271.11