Process accounts: A

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This query is : Resolved

Sushant Lohani (Querist)

21 April 2008 Case I:
Suppose
Units Rs
Op. Stock 2000 2000
Units intro. 20k 8k
N. Loss 400 20
Cl. stock 1500 1500

R.M. - 4000
Labour - 6000
O/h - 640

What is cost per unit? Is it:

a){ ((2000+8000-1500)+6000+640+4000)-20}/
{(2000+20000-1500}-400}

OR

b) {((2000+8000+6000+640+4000)-20}/
{(2000+20000}-400}

CASE II:

Suppose
Units Rs
Opening WIP 1500 15k
Units Intro. 18500 52k
Normal loss 1000 3000
Closing WIP 5000 18k

Suppose equivalent units of production of R/m is 16000. How to find cost per unit of RM.

Is it
a) (52k-4000)/16000
OR {(52000+15000)-4000}/16k
OR {(52000+15000-18000)-4000}/16000

Q1.plz expplain the logic as well

Amit Sharma

Amit Sharma (Expert)

05 May 2008 Case I:

Simple logic: it is obvious that the debit side of process account is higher as the following are added(amounts) 8000+2000+4000+6000+640=24640.divided by total no of units i.e.20000+2000=22000. there fore the cost per unit will be 24640/22000= Rs.1.12/unit. The diff amount will be on the credit side of the process a/c as By tfd to Process B which comes to 20100 units at an amount of Rs.15120.

Case II:

The total side of the debit side of the process a/c is (amount)15000+52000+16000=83000 , the total no of units in the debit side of process a/c is 20000 units. The debit is greater than the credit by 14000 units at an amount of Rs. 62000.

Now use simple mathematical calculation

if 20000 units is 83000 how many units is 16000 , you will get 3856 units of R/M.

Therefore now you will get the cost per unit of R/M i.e. 16000/3856 = Rs. 4.149 per unit.

Hope you have under stood the logic behind procees a/c .

Regards,

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