Process Costing Joint and By Product CA Past Years Exam Question

CA R. K. Mehta Process Costing Joint and By Product CA Past Years Exam Question Question : 1 May, 2012 A product passes through two processes A and B. During the year, the input to Process A of Basic raw material was 8,000 units at `9 per unit. Other information for the year is as follows:- Particulars Output units Normal Loss (% to input) Scrap value per unit (`) Direct wages (`) Direct expenses (`) Selling price per unit (`) Process A 7,500 5% 2 12,000 6,000 15 Process B 4,800 10% 10 24,000 5,000 25 Total overheads ` 17,400 were recovered as percentage of direct wages. Selling expenses were `5,000. There are not allocated to the processes. 2/3 rd of the output of Process A was passed on to the next process and the balance was sold. The entire output of Process B was sold. Prepare Process A and Process B Accounts. Question : 2 May, 2010 A Toothpowder Manufacturer process bulk quantities of Toothpowder from two raw materials A and B. material A is introduced into Process I from which the output goes to Process II where Material B is introduced. During March, the company purchased 80,000 kg of Material A which was introduced into Process I. Production details of Process I and costs are:- Material A purchased 80,000 kg at ` 6 per kg Labour cost ` 80 per hour Processing cost (excluding labour) 63 hours General overheads recovered at 125% of @ ` 30/ hour labour cost Standard yield 90% of input Waste from this process sold at ` 1.50 per kg Actual output from this process was 70,000 kg, which was transferred to Process II. The company used in Process II, 70,000 kg of output of Process I together with 30,000 kg of Material B purchased. The production details of Process II and costs are: - Material B purchased 30,000 kg at ` 2 per kg Labour cost ` 40 per hour Processing cost (excluding labour) 45 hours @ General overheads recovered at 50% of ` 20/hour labour cost Standard yield 95% of input Waste from this process sold at ` 1.00 per kg Actual output of Process II was 96,000 kg, which was transferred to Finished Stock. There was an inquiry for a quantity of 1,700 kg of specially prepared waste material from Process I. This material would have to be specially processed and packed incurring the following cost Processing - ` 0.90 per kg, packaging - ` 0.40 per kg. This specially prepared waste incurs no process loss and could be entirely sold for ` 3.20 per kg. Page No. 1

You are required to: - 1. Record the information in the Process Cost Accounts, before the inquiry was received and show the overall profit and or loss transferred to the Profit and Loss A/c from the Abnormal Gains or Losses in processing. 2. Advise the management on whether or not they should produce 1,700 kg of specially processed waste material from Process I, and the effect on the overall results of the company? Question : 3 Nov, 2007 Product KLIM passes through 5 operations. The output of the 5 th operation becomes the finished product. The input, rejection, output, labour and overheads of each operation for a period are as under: - Operation Input (units) Rejection (units) Output (units) Labour and Overhead (`) 1 21,600 5,400 16,200 1,94,400 2 20,250 1,350 18,900 1,41,750 3 18,900 1,350 17,550 2,45,700 4 23,400 1,800 21,600 1,40,400 5 17,280 2,880 14,400 86,400 You are required to: - 1. Determine the input required in each operation for one unit of final out. 2. Calculate the labour cost and overhead cost at each operation for one unit of final output and the total labour and overhead cost of all operations for one unit of final output. Question : 4 May, 2003 RST Ltd. manufactures plastic moulded chairs. Three models of moulded chairs, all variation of the same design are Standard, Deluxe and Executive. RST Ltd. has extrusion, form, trim and finish operations. Plastic sheets are produced by the extrusion operation. During the forming operation, the plastic sheets are moulded into chair seats and the legs are added. The standard model is sold after this operation. During the trim operation, the arms are added to the Deluxe and Executive models and the chair edges are smoothed. Only the executive model enters the finish operation, in which padding is added. All of the units produced receive the same steps within each operation. In April, 2015, the relevant information is given below: - Operation Material Conversion Cost Extrusion 2,31,000 6,06,375 Form 77,000 2,97,000 Trim 26,250 1,55,250 Finish 21,000 94,500 The company is able to produce 10,500 chairs of Standard Model, 5,250 chairs of Deluxe Model and 3,500 chairs of Executive Model. Required: (i) For each product produced by RST Ltd. during April, 2015, determine the unit cost and the total cost. Page No. 2

Page No. 3 (ii) Now consider the following information for May. All units costs in May are identical to the April unit costs calculated as above in (i). At the end of May, 1,500 units of the Deluxe model remain in work-in-progress. These units are 100% complete as to materials and 65% complete in the trim conversion operation. Determine the cost of the Deluxe model work-in-process inventory at the end of May. Question : 5 May, 2010 Pharma Limited produces product Glucodin which passes through two processes before it is completed and transferred to finished stock. The following data relates to March: - Particulars (`) Process - I Process II Finished Stock Opening stock 1,50,000 1,80,000 4,50,000 Direct materials 3,00,000 3,15,000 --- Direct wages 2,24,000 2,25,000 --- Factory overheads 2,10,000 90,000 --- Closing stock 74,000 90,000 2,25,000 Inter process profit included in opening stock Nil 30,000 1,65,000 Output of Process I is transferred to Process II at 25% profit on the transferred price, whereas output of Process II is finished stock at 20% on transfer price. Stock-in-process are valued at prime cost. Finished Stock is valued at the price at which it is received from Process II. Sales for the month is ` 28,00,000. You are required to prepare Process I Account, process II Account and Finished Stock Account, showing the profit element at each stage. Question : 6 Nov, 2010 Following information is available regarding Process A for the month of October. Opening WIP 40,000 units Opening WIP (Materials 100% complete and 25% Material complete for labour and overhead) Units introduced Units completed Units in process on 31 st October (Materials 100% complete and 50% complete for Labour and OH) Labour Overhead 1,80,000 units 1,50,000 units Cost incurred during the 70,000 units month Material Labour Overhead ` 1,00,000 ` 25,000 ` 45,000 ` 6,60,000 ` 5,55,000 ` 9,25,000 Assume that FIFO Method is used for WIP Inventory valuation. Required:- (i) Statement of Equivalent production (ii) Statement showing cost for each element (iii) Statement of Apportionment of cost (iv) Process A Account Question : 7 May, 1987 The following data pertains to Process I of Beta Limited: - 1,500 units at ` 15,000. Degree of completion is materials 100%, Labour Opening WIP and OH 33 1 3 % Input of materials 18,500 units at ` 52,000 Other costs Direct labour ` 14,000 and overheads ` 28,000 Closing WIP 5,000 units, Degree of completion is materials 90%, Labour and OH 30% Normal process loss 10% of total input (Opening WIP plus units put in), scrap value ` 2 p.u. Units transferred to next process 15,000 units

Page No. 4 Assume (a) the company uses FIFO method, (b) Cost of opening WIP is fully transferred to the next process. Prepare process and other accounts from the above information. Question : 8 May, 1998/Nov 2009 XP Limited furnishes you the following information relating to process II. Prepare (a) Statement of Equivalent Production persuade (b) Statement showing the cost of finished goods, Abnormal loss and Closing WIP (c) Process II Account and Abnormal Loss Account Opening WIP is Nil Closing WIP 1,200 units, Degree of completion is material 100%, labour 50% and overhead 40% Units introduced 42,00 units at ` 12 Degree of completion of Abnormal loss is materials 100%, labour 80%, overheads 60% Expenses debited to the Process: Direct material ` 61,530 Labour ` 88,820 Overheads ` 1,76,400 Finished output 39,500 units Units scrapped as normal loss were sold at ` 4.50 per unit All the units of abnormal loss were sold at ` 9 per unit Normal loss in the process 2 % of input Question : 9 May, 2007 Following details are related to the work done in Process A of XYZ company during the month of March: - Opening WIP 2,000 units Cost incurred: Material ` 80,000 Labour ` 15,000 Overheads ` 45,000 Material introduced in Process A 38,000 units at ` 14,80,000 Closing WIP 2,000 units, Degree of completion was material 100%, labour and overhead 80% Units scrapped 3,000 units, Degree of completion was material 100%, labour and overhead 80% Other cost in Process A Direct labour ` 3,59,000 Overheads ` 10,77,000 Scrapped units fetch ` 20 per piece Normal loss 5% of total input including opening WIP Units finished and transferred to Process B 35,000 units Prepare: - (a) Statement of equivalent production (b) Statement of cost (c) Statement of Distribution of cost (d) Process A Account, Normal and Abnormal Loss Accounts Question : 10 Nov, 2011 The following details are available of process X for August: - Opening WIP 8,000 units Units scrapped 3,000 units and Degree of completion of Degree of completion and cost: Material 100% and Labour and overhead 80% Material (100%) ` 63,900 Closing WIP 18,000 units and Degree of completion of Labour (60%) ` 10,800 Material 100% and Labour and overhead 70% Overheads (60%) ` 5,400 Units completed and transferred to next process ` 1,58,000 Input 1,82,000 units at ` 7,56,900 Scrape value to be adjusted in direct material cost ` 8 p.u. Labour paid ` 3,28,000 Units completed and transferred to next process 1,58,000 Overheads incurred ` 1,64,000 units Normal loss is 8% of total input including opening WIP. Assuming Average Method of inventory is used, you are required to compute Equivalent Production and cost per unit. Also prepare Process Cost Account, Normal Loss Account and Abnormal Loss/ Gain Account.

Question : 11 May, 1998 The following data relate to Process Q: - (i) Opening work-in-process 4,000 units and degree of completion: - Materials (100%) ` 24,000, Labour (60%) ` 14,400 and Overheads (60%) ` 7,200 (ii) Received during the month of April, 2015 from Process P 40,000 units ` 1,71,000 (iii) Expenses incurred in Process Q during the month Materials ` 79,000, Labour ` 1,38,230 and Overheads ` 69,120 (iv) Closing work-in-process 3,000 units, degree of completion: - Materials 100% and Labour and Overheads 50% (v) Units scrapped 4,000 units, degree of completion: Materials 100% and Labour and Overheads 80% (vi) Normal loss: 5% of current input. (vii) Spoiled goods realised ` 1.50 each on sale. (viii) Completed units are transferred to warehouse 37,000 units. Prepare Process Q Account Question : 12 May, 2001 The following information is given in respect of Process 3 for the month of January. Opening Stock - 2,000 units made-up of Direct Material I ` 12,350 Direct Material II ` 13,200 Direct labour ` 17,500 Overheads ` 11,000 Transferred from Process 2 ` 20,000 units @ ` 1,21,000. Transferred from Process 4 ` 17,000 Cost incurred in process 3 Direct materials - ` 30,450, Direct labour ` 61,550, Overhead ` 60,200 Scrap: 1,000 units - Direct materials 100%, Direct labour 60%, Overhead 40% Normal loss 10% of production. Scrapped units realised ` 4 per unit. Closing stock: 4,000 units Degree of completion: Direct materials 80%, Direct labour 60%, Overhead 40% Prepare Process Account 3 using average cost method, along with necessary supporting statements. Question : 13 Nov, 1993 Following data are available for a product for the month of July: - Particulars Process I Process II Opening WIP Nil Nil Costs incurred during the month Direct material (`) 60,000 --- Labour (`) 12,000 16,000 Factory overheads (`) 24,000 20,000 Units in production Received in process 40,000 36,000 Completed and transferred 36,000 32,000 Closing WIP 2,000? Normal Loss in process 2,000 1,500 Production remaining in Process has to be valued as follows Material 100%, labour 50% and overheads 50%. There have been no abnormal losses in Process II. Prepare Process Accounts and work out the missing figures. Page No. 5

Question : 14 May, 2013 ABX Limited provides the following information relating to Process B: - Opening WIP: Nil Units introduced: 45,000 units @ ` 10 per unit Expenses debited to the process: - Direct Material ` 65,500 Direct labour ` 90,800 Overheads ` 1,80,700 Normal loss in the process: 2% of input. WIP 1,800 units, Degree of completion: Materials 100%, Labour 50%, Overhead 40% Finished output 42,000 units, Degree of completion of abnormal loss: Materials 100%, Labour 80%, Overhead 60% Units scraped as normal loss were sold ` 5 per unit. All the units of abnormal loss were sold ` 2 per unit. You are required to prepare: (i) Statement of equivalent production (ii) Statement showing the cost of finished goods, abnormal loss and closing balance of WIP (iii) Process B Account and Abnormal Loss Account. Question : 15 May, 2014 M J Private Limited produces a product SKY which passes through two processes, viz. Process A and Process B. The details for the year ending 31 st March, 2014 are as follows: - Particulars Process A Process B 40,000 units introduced at a cost of 3,60,000 --- Material consumed (`) 2,42,000 2,25,000 Direct wages (`) 2,58,000 1,90,000 Manufacturing expresses (`) 1,96,000 1,23,720 Output in units 37,000 27,000 Normal wastage of input 5% 10% Scrap value (per unit) 15 20 Selling price (per unit) 37 61 Additional information: (a) 80% of the output of process A, was passed on to the next process and the balance was sold. The entire output of Process B was sold. (b) Indirect expenses for the year was ` 4,48,080. (c) It is assumed that Process A and Process B are not responsibility centres. Required: - (i) Prepare Process A and Process B Account (ii) Prepare Profit and Loss A/c showing the net Profit/Loss for the year. Question : 16 Nov, 2014 The following information relate to process A: Opening work - in progress: 8,000 units at ` 75,000 Degree of completion: Material 100%, labor and overhead 60% Input 1,82,000 units at ` 7,37,500 Wages paid ` 3,40,600 Overheads ` 1,70,300 Units scrapped 14,000 Degree of completion: Material 100%, labor and overhead 80% Closing work - in progress 18,000 units Degree of completion: Material 100%, labor and overhead 70% Page No. 6

Units completed and transferred to next process: 1,58,000 units Normal loss: 5% of total input including opening WIP Scrap value to be adjusted out of direct material cost ` 5 per unit You are required to compute on the basis of FIFO basis: - (a) Equivalent production (b) Cost per unit (c) Value of units transferred to next process. Question : 17 Nov, 2015 The following information is furnished by ABC company for Process II of its manufacturing activity for the month of April 2015: - Opening WIP: Nil Units transferred from Process I: 55,000 units at ` 3,27,800. Expenses debited to the Process II: - Consumables ` 1,57,200 Direct labour ` 1,04,000 Overheads ` 52,000 Units transferred to Process III: 51,000 units. Closing WIP 2,000 units, Degree of completion: Consumables 80%, Labour 60%, Overhead 60% Normal loss 4% of units introduced. Units scraped 2,000 units and were sold ` 5 per unit. You are required to prepare: (i) Statement of equivalent production (ii) Determine the cost per unit (iii) Determine the value of work-in-progress and units transferred Process III. Question : 18 May, 1998 Two products P and Q are obtained in a crude form and require further processing at a cost of ` 5 for P and ` 4 for Q per unit before sale. Assuming a net margin of 25% on cost, their sale prices are fixed at ` 13.75 and ` 8.75 per unit respectively. During this period, the joint cost was ` 88,000 and the output were 8,000 units of P and 6,000 units of Q. You are required to ascertain the joint cost per units. Question : 19 May, 2007 A Company produces two joint products P and Q in 70 : 30 ratio from basic raw materials in department A. The input output ratio of department A is 100 : 85. Product P can be sold at the split of stage or can be processed further at department B and sold as product AR. The input output ratio is 100 : 90 of department B. The department B is created to process product P only and to make it product AR. The selling prices per kg. are as under: - Product P ` 85 Product Q ` 290 Product AR ` 115 The production will be taken up in the next month. Raw materials 8,00,000 kgs. Purchase price ` 80 per kg. Particulars Department A (` Lacs) Department B (` Lacs) Direct Materials 35.00 5.00 Direct Labour 30.00 9.00 Variable Overheads 45.00 18.00 Fixed Overheads 40.00 32.00 TOTAL 150.00 64.00 Selling Expenses (` Lacs) Product P 24.60 Product Q 21.60 Product AR 16.80 Required: - (i) Prepare a statement showing the apportionment of joint costs on the basis of Net Sales. (ii) State whether it is advisable to produce product AR or not. Page No. 7

Question : 20 May, 2005 A company produces two joint products X and Y, from the same basic materials. The processing is completed in three departments. Materials are mixed in department I. At the end of this process X and Y get separated. After separation X is completed in the department II and Y is finished in department III. During a period 2,00,000 kgs of raw material were processed in department I, at a total cost of ` 8,75,000, and the resultant 60% becomes X and 30% becomes Y and 10% normally lost in processing. In department II 1/6 of the quantity received from department I is lost in processing. X is further processed in department II at a cost of ` 1,80,000. In department III further new material added to the material received from department I and weight mixture is doubled, there is no quantity loss in the department and further processing cost (with material cost) is ` 1,50,000. The details of sales during the year: - Particulars Product X Product Y Quantity sold (kgs) 90,000 1,15,000 Sales price per kg. (`) 10 4 There were no opening stocks. If these products sold at split-off point, the selling price of X and Y would be ` 8 and ` 4 per kg respectively. Required: (a) Prepare a statement showing the apportionment of joint cost to X and Y in proportion of sales value at split off point. (b) Prepare a statement showing the cost per kg of each product indicating joint cost, processing cost and total cost separately. (c) Prepare a statement showing the product wise profit for the year. (d) On the basis of profits before and after further processing of product X and Y, give your comment that products should be further processed or not. Question : 21 May, 2002 In a chemical manufacturing company, three products A, B and C emerge at a single split off stage in department P. Product A is further processed in department Q, product B in department R, and product C in department S. There is no loss in further processing of any of the three products. The cost data for a month are as under: Cost of raw materials introduced in department P ` 12,68,800 Department P Q R S Direct Wages (`) 3,84,000 96,000 64,000 36,000 Factory overheads of ` 4,64,000 are to be apportioned to the departments on direct wages basis. During the month under reference, the company sold all three products after processing them further as under: - Product A B C Output sold (kgs.) 44,000 40,000 20,000 Selling Price per kg. (`) 32 24 16 If these products were sold at the split off stage, that is, without further processing, the selling prices would have been ` 20, ` 22 and ` 10 each per kg., respectively for A, B and C. Required: - (a) Prepare a statement showing the apportionment of joint costs to joint products on the basis of physical number of units. (b) Prepare a statement showing product-wise and total profit if products are sold without further processing. Page No. 8

(c) Present a statement showing product-wise and total profit for the month under reference if the products are sold after further processing. (d) What processing decision should have been taken to improve the profitability of the company? (e) Calculate the product-wise and total profit arising from your recommendation in (d) above. Question : 22 May, 2015 A company manufactures one main product (M1) and two by-products B1 and B2. For the month of January, the following details are available: - Total cost upto Separation Point ` 2,12,400 Particulars M1 B1 B2 Cost after separation (`) ---- 35,000 24,000 No. of units produced 4,000 1,800 3,000 Selling price per unit (`) 100 40 30 Estimated net profit as % to sales value ---- 20% 30% Estimated selling expenses as % to sales value 20% 15% 15% There is no opening or closing inventories. You are required to prepare statement showings: - (i) Allocation of joint cost (ii) Product wise and overall profitability of the company for January Page No. 9