Cost and Management Accounting
Process Costing
In this articles we are providing TYBCOM-SEM VI- COST ACCOUNTING l Process Costing MCQ with Answer PDF. TYBCOM-SEM VI- COST ACCOUNTING l Process Costing MCQ with Answer Semester VI. We are providing 200+ MCQ with answer.
d) Total cost + Total output
15. Costs
incurred prior to the point of separation of the joint or by-products are
termed as
(a) Process
cost
(b) Joint
cost
(c) Main cost
(d) Separable
cost
16. When a
single manufacturing process yields two products, one of which has a relatively
high sales value compared to the other, the two products are respectively known
as
(a) joint
products and by products
(b) joint
products and scrap
(c) main
products and by products
(d) main
products and joint products
17. A process
gives rise, incidentally, to an item of low value, which is called
(a) a joint
product
(b) a
by-product
(c) scrap
(d) waste
18. By products
and main products are differentiated by
(a) number of
units per processing period
(b) weight or
volume of outputs per period
(c) the
amount of sales value per unit
(d) none of the
above
19. A Petroleum
company assigns certain value based on the calorific value to each petroleum
product, and these values become the basis of apportionment of joint cost among
petroleum products. This is an example of -
(a) Average
Unit Cost Method
(b) Physical
Unit Method
(c) Survey
method
(d) None of the
above
20. Under this
method of allocation of joint costs, even high-quality items may have a lower
price
(a)
Contribution Margin Method
(b) Survey
method
(c) Average
Unit Cost Method
(d) None of the
above
21. This is
also known as ‘Weighted Average Cost Method’.
(a)
Contribution Margin Method
(b) Survey
method
(c) Net Realizable
Value Method
(d) None of the
above
22. Under this
method of allocation of joint costs, higher-priced items are charged more costs
–
(a)
Contribution Margin Method
(b) Market
Value Method
(c) Average
Unit Cost Method
(d) None of the
above
23. This method
of allocation of joint costs is useful when the products are not saleable at
the spilt off stage without further processing
(a) Market
value at the point of separation
(b) Net
Realizable Value
(c) Market
value at finished stage
(d) None of the
above
24. For the
purpose of allocating joint costs to joint products, the sale price at point of
sale, reduced by costs to complete after split-off, is assumed to be equal to –
(a) Joint Costs
(b) Total Costs
(c) Net
Sales Value at split-off
(d) Sale price
Less normal profit margin at point of sale
25. Joint Costs
are normally allocated on the basis of relative
(a)
Profitability
(b) Sales
Value
(c) Direct
Labour Hours
(d) Direct
Machine Hours
26. Net
Realizable Value is defined as
(a) Sales value
at split-off point
(b) Sales price
minus fixed costs
(c) Sales price
minus joint costs
(d) Sales
price minus costs to complete the product
27. Joint Cost
are allocated according to sales value of individual products under –
(a) Market
Value Method
(b) Average
Unit Cost Method
(c) Survey
Method
(d) Physical
Unit Method
28. Under the
Market Value Method, Joint Costs are allocated according to of individual
products
(a) Cost Price
(b) Market
price or cost price whichever is less
(c) Sales
Value
(d) Cost and
Demand Price
29. Under the
Average Unit Cost Method of apportionment of joint costs, the cost per unit of
each product is
(a) Constant
(b) Different
(c) Same
(d)
Semi-Variable
30. All costs
incurred beyond the split-off point that are assignable to one or more
individual products are called
(a) by product
costs
(b) joint costs
(c) main costs
(d)
separable costs
_________________________________________________________________________
Module VI : Process Costing
Example 1 :
A product passes through two processes. The output of Process
I becomes the input of Process II and the output of Process II is transferred
to warehouse. The quantity of raw materials introduced into Process I is 20,000
kg at Rs. 10 per kg. The cost and output data for the month under review are as
under :
|
Particulars |
Process I |
Process II |
|
Direct materials |
Rs. 60,000 |
Rs. 40,000 |
|
Direct labour |
Rs. 40,000 |
Rs. 30,000 |
|
Production overhead |
Rs. 39,000 |
Rs. 40,250 |
|
Normal loss |
8% |
5% |
|
Output in units |
18,000 |
17,400 |
|
Realizable Scrap Value per unit |
2.00 |
3.00 |
The company’s policy is to fix the selling price of the end
product in such a way as to yield a profit of 20% on selling price.
Required :
a) Prepare
process account and other loss and gain accounts
b) Determine
the selling price per unit of the end product
Example 2 : (HW)
Product B is obtained after is passes through three distinct
processes. The following information is obtained from the accounts for the week
ending 31st October 2015 :
|
Items |
Total Rs. |
Process |
|
|
|
|
|
I |
II |
III |
|
Direct materials |
7,542 |
2,600 |
1,980 |
2,962 |
|
Direct wages |
9,000 |
2,000 |
3,000 |
4,000 |
1,000 units at Rs. 3 each were
introduced to Process I. There was no stock of raw material or work in progress
at the beginning or at the end of the period. The output of each process passes
direct to the next process and finally to finished stock. Production overhead
is recovered on 100% of direct wages. The following additional data are
obtained :
|
Process |
Output during the week (units) |
Percentage of normal loss to input |
Value of scrap per
unit (Rs.) |
|
I |
950 |
5% |
2 |
|
II |
840 |
10% |
4 |
|
III |
750 |
15% |
5 |
Prepare process cost accounts and abnormal or loss accounts.
Example 3 : (HW)
The following particulars for the Process II are given :
|
|
Units
|
Rs. |
|
Transfer from the previous process at cost |
4,000 |
9,000 |
|
Transfer to finished stock from the process |
3,240 |
-- |
|
Direct Wages |
-- |
2,000 |
|
Direct Material used |
-- |
3,000 |
The factory overhead in process is
absorbed @ 400% of the direct materials. Allowance for normal loss is 20% of
units worked. The scrap value is Rs. 5 per unit.
Prepare :
a) Process
II account
b) Normal
Wastage account
c) Abnormal
Effectives account
Example 4 :
A product passes through three processes A,B and C. The
details of expenses incurred on the three processes during the year were as
under :
|
Processes |
A |
B |
C |
|
Units introduced |
10,000 |
|
|
|
Cost per unit |
Rs.100 |
|
|
|
|
Rs. |
Rs. |
Rs. |
|
Sundry materials |
10,000 |
15,000 |
5,000 |
|
Labour |
30,000 |
80,000 |
65,000 |
|
Direct expenses |
6,000 |
18,150 |
27,200 |
|
Selling price per unit of output |
120 |
165 |
250 |
Management expenses during the year were Rs. 80,000 and
selling expenses were Rs. 50,000. These are not allocable to the processes.
Actual output of the three process
was : A-9,300 units, B-5,400 units and C-2,100 units. Two thirds of the output
of Process A and one half of the output of Process B was passed on to the next
process and the balance was sold. The entire output of Process C was sold.
The normal loss of the three
processes, calculated on the input of every process was Process A – 5%, B-15%
and C-20%. The loss of Process A was sold at Rs. 2 per unit, that of B at Rs. 5
per unit and of Process C at Rs. 10 per unit.
Prepare the three Process Accounts and the Profit and Loss
account.
Example 5 : (HW)
Marshall and Company produces a patent material used in
building, in the manufacture of which three processes are involved. The
materials is produced in three consecutive grades, namely, soft, medium and
hard. Figures relating to production for the first six months of 2010 are as
follows :
|
Particulars |
Process I |
Process II |
Process III |
|
Raw materials used in tons |
1,000 |
-- |
-- |
|
Cost of materials per ton |
200 |
-- |
-- |
|
Manufacturing Wages and Expenses |
72,500 |
40,800 |
10,710 |
|
Loss in Weight (no realizable value) |
5% |
10% |
20% |
|
Normal Scrap (sold @ Rs. 50 per ton) |
50 tons |
30 tons |
51 tons |
|
The product is dealt with
as follows : |
|
|
|
|
Transferred to
Next Process |
66 2/3% |
50% |
- |
|
Transferred
to warehouse for sale |
33 1/3% |
50% |
100% |
|
Profit as a percentage of selling price |
20% |
20% |
33 1/3% |
You are required to prepare an account for each process,
showing the cost per ton of each process. The company has incurred
administrative expenses of Rs.15,000 and Selling Expenses of Rs.6 per unit for
the six month period. You are required to prepare Process account and costing
profit and loss account for the six month period
(F.Y. B. Com (H) – Final Exam – Nov 2018)
Example 6 :
In a factory, the output passes through three processes to
completion i.e. Crushing, Refining and Finishing. The details are given below
for the month of May 2018.
|
Particulars |
Crushing
(Rs.) |
Refining (Rs.) |
Finishing (Rs.) |
|
Wages |
15,000 |
12,000 |
10,000 |
|
Power |
6,000 |
5,000 |
3,000 |
|
Steam |
2,000 |
1,000 |
500 |
|
Other expenses |
3,000 |
2,000 |
500 |
Coconut purchased 3,000 kgs costing Rs. 3,00,000. Crude oil
produced – 2,500 kg, Refined oil – 1,800 kg and Finished Oil – 1,760 kg.
500
kg crude oil was sold at a cost plus 20% in Crushing Process. Coconut residue
300 kg was sold for Rs. 10,000 and jute sacks were sold for Rs, 1,000. Wastage
of 100 kg from the refining process was sold for Rs. 800. Casks cost Rs. 3,000.
Oil stored in casks could be sold for Rs. 200 per kg. Prepare all processes
accounts and Finished Stock account in the books of the company.
(F.Y. B.Com (H) – Re examination – January
2019)
Example 7 : (HW)
XY Company mixes powdered
ingredients in two different processes to produce one product. The output of
Process 1 becomes the input of Process 2 and the output of Process 2 is
transferred to the packing department.
From the information given below, you are required to open
accounts for Process 1, Process 2, Abnormal Loss and Packing Department.
Process 1
|
Input : |
|
|
Material A |
6,000 kilograms at 50 paise per kilogram |
|
Material B |
4,000 kilograms at Rupee 1 per kilogram |
|
Mixing Labour |
430 hours at Rs.2 per hour |
|
Normal loss |
5% of weight input, disposed off at 16 paise per kg |
|
Output |
9,200 kilograms |
Process 2
|
Input : |
|
|
Material C |
6,600 kilograms at Rs. 1.25 per kilogram |
|
Material D |
4,200 kilograms at Re. 0.75 per kilogram |
|
Flavouring Essence |
Rs. 300 |
|
Mixing Labour |
370 hours at Rs. 2 per hour |
|
Normal waste |
5% of weight input with no disposal value |
|
Output |
19,000 kilograms |
Overhead of Rs. 3,200 incurred by
the two processes to be absorbed on the basis of mixing labour hours.
Example 8 :
An oil company gives the following data. You are required to
prepare various process accounts. The company purchased 1000 quintals of
coconuts @ Rs. 500 per quintal
|
Particulars |
Crushing |
Refining |
Finishing |
|
|
Rs. |
Rs. |
Rs. |
|
|
|
|
|
|
Direct Labour |
13,200 |
6,000 |
6,000 |
|
Power Expenses |
2,000 |
1,000 |
800 |
|
Sundry Materials |
1,400 |
400 |
- |
|
Repairs to Plant and Machinery |
1,000 |
800 |
800 |
|
Steam |
700 |
360 |
200 |
|
Cost of Casks |
|
|
1,200 |
Other
information :
1. Other
factory overheads are charged @ 75% of Direct Labour in all the processes.
2. Normal
Coconut Residue in Crushing Process was 30% of the input and output of Crude
Oil was 690 quintals. The realisation value of scrap was Rs. 20 per
quintal. Any difference in quantities
was considered to be abnormal
3. In
the refining process, there was a normal weight loss of 90 quintals which was
sold for Rs. 12,400. There were no abnormal gains or losses in the process
4. The
actual output of the Finishing Process was estimated at 95% after normal loss.
The actual output obtained was 580 quintals. No scrap value can be recovered
from any losses in this process
5. The
Finished oil was sold at a profit of 20% on cost and the full amount was
realised.
Prepare all the process accounts and show the Cost per
quintal in each process.
Example 9 : (HW)
Bangalore Products Ltd. Manufactures a chemical in three
processes. The details of these three processes are as follows :
|
|
Process I |
Process II |
Process III |
|
Transfer to next process |
66 2/ 3% |
60% |
-- |
|
Transfer to warehouse for sales |
33 1/3% |
40% |
100% |
In each process out of the total weight put in, 4% is wasted
and 6% is scrap. The scrap is sold at Rs.6, Rs. 10 and Rs.12 per tonne in I, II
and III processes respectively. For the month of October, the details of
expenditure are :
|
Process I |
2800 tonnes of materials at |
Rs. 40/tonne |
|
Process II |
320 tonnes of materials at |
Rs. 64/tonne |
|
Process III |
2520 tonnes of materials at |
Rs. 28/tonne |
Production labour cost is : Process I Rs. 20,608; Process II
Rs. 12,560; Process III 11,580.
For the month of October, the
office and administration expenses worked out at Rs. 15,567 which is to be
charged equally for all the processes.
Prepare Process Cost Accounts. Calculate the cost per tonne
in each process.
Equivalent
Production (Work in Progress) FIFO Method :
Example 10:
In a process costing system, the following details relate to
the month of January 2014.
|
Particulars |
|
|
Opening Stock (valued at Rs. 2,325) |
1500 units |
|
Degree of completion :
|
|
|
Materials |
80% |
|
Labour |
60% |
|
Overheads |
60% |
|
Transfer from previous process (@ Rs. 12,080) |
12,500 units |
|
Transfer to the next process |
12,000 units |
|
Materials added in the process |
Rs. Nil |
|
Labour added in the process |
Rs. 6,030 |
|
Overheads added in the process |
Rs. 9,045 |
|
Normal Units scrapped |
800 units |
|
Value realized from scrap |
Rs. 200 |
|
Closing stock |
1,200 units |
|
Degree of completion
|
|
|
Materials |
90% |
|
Labour |
80% |
|
Overheads |
80% |
You are required to prepare statement of equivalent
production, Statement of cost per unit, Statement of evaluation and process
account.
Example 11 : (HW)
The following data are available in
respect of Process I for February 2015.
1)
Opening stock of WIP : 800 units at a total cost
of Rs. 4,000.
2)
Degree of completion of opening WIP :
Materials – 100%
Labour – 60%
Overheads – 60%
3)
Input of materials at a total cost Rs. 36,800
for 9,200 units
4)
Direct wages incurred Rs. 16,740
5)
Production overhead Rs. 8,370
6)
Units scrapped 1200 units. The stage of
completion of these units are :
Materials – 100%
Labour – 80%
Overheads – 80%
7)
Closing WIP : 900 units. The stage of completion
of these units are :
Materials – 100%
Labour – 70%
Overheads – 70%
8)
7,900 units were completed and transferred to
next process.
9)
Normal loss is 8% of the total input (Opening
stock plus units put it) 10) Scrap value is Rs. 4 per unit You are
required to :
a) Compute
equivalent production
b) Calculate
cost per equivalent unit for each
element
c) Calculate
cost of abnormal loss (or gain), closing WIP and the units transferred to the
next process using FIFO method and
d) Prepare
Process Account
Example 12 :
The following data pertains to Process 1 for March 2015 of
Beta Ltd. :
Opening WIP :
1,500 units @ Rs. 15,000 Degree of Completion :
a)
Materials : 100%
b)
Labour and Overheads : 33 1/3% Input of materials :
a)
Materials – 18,500 units at Rs. 52,000
b)
Direct labour – Rs. 14,000
c)
Overheads – Rs. 28,000 Closing WIP : 5,000 units
Degree of Completion :
a) Materials
: 90%
b) Labour
and Overheads : 30%
Normal Process loss is 10% of total input (Opening WIP +
units put in)
Scrap value Rs. 2 per unit
Units
transferred to the next process : 15,000 units You are required to:
i.
Compute equivalent units of production
ii.
Compute cost per equivalent unit for each cost
element i.e. material, labour and overheads
iii.
Compute the cost of finished output and closing
WIP iv. Prepare process and
other accounts
Example 13:
The following data relates to Process Q :
a) Opening
WIP 4,000 units Degree of completion :
Materials – 100% - Rs. 24,000
Labour – 60% - Rs. 14,400
Overheads – 60% - Rs. 7,200
b) Received
during the month of April from Process P :
40,000 units – Rs. 1,71,000
c) Expenses
incurred in Process Q during the month
Materials – Rs. 79,000
Labour – Rs. 1,38,230
Overheads – Rs. 69,120
d) Closing
WIP - 3000 units Degree of completion :
Materials – 100%
Labour – 50%
Overheads – 50%
e) Units
scrapped – 4,000 units, Degree of completion : Material – 100%, Labour and
overheads – 80%
f) Normal
Loss : 5% of current input
g) Spoiled
goods realised Rs. 1.50 each on sale
h) Completed
units are transferred to warehouse Required :
i.
Equivalent units statement
ii.
Statement of cost per equivalent unit and total
costs iii. Process Q account
iv. Any
other account necessary
Average
Stock Method :
Example 14 :
Roy & Johnson (P) Ltd. Gives the following information
relating to process A in its plant for the month of December 2014 :
1) Opening
WIP on 1.12.14 – 500 units
Material –Rs. 4,800
Labour - Rs. 3,200
Overheads – Rs.6,400
Total – Rs. 14,400
2) Units
introduced during the month – 19,500 units
3) Processing
costs during the month : (In Rs.)
|
Materials |
1,86,200 |
|
Labour |
72,000 |
|
Overheads |
1,06,400 |
|
Total |
3,64,600 |
4) Output
:
Units transferred to Process B – 18200
Units scrapped (completely processed) – 1,400
WIP (Balance) – 400
(degree of completion : Materials -100%, labour and
overheads – 50%)
Normal loss in processing is 5% of total input and normal
scrapped units fetch Re. 1 each.
Prepare the following for process A for December 2014 :
a) Statement
of equivalent production
b) Statement
of cost
c) Statement
of evaluation
d) Process
A Account
Example 15 : (HW)
The following information is given in respect of Process No.
3 for the month of March 2015:
i. Opening
stock – 2,000 units made up of :
Direct material Rs. 25,550; Direct
labour Rs. 17,500; Overheads Rs. 11,000 ii. Transferred
from Process 2 – 20,000 units @ Rs. 6 per unit
iii. Transferred
to Process 4 – 17,000 units iv. Expenditure
incurred in Process 3:
Direct materials Rs. 30,000; direct labour Rs. 60,000;
Overheads Rs. 60,000.
v.
Scrap 1000 units – Direct material 100%, Direct
labour 60%, overheads 40%
vi.
Normal loss 10% of production, scrapped units
realised Rs. 4 per unit
vii.
Closing stock 4,000 units :
Degree of completion : Direct material 80%; direct labour
60% and overheads 40%.
Prepare statement of equivalent
production, statement of cost per unit, statement of evaluation and Process 3
account.
Example 16 :
The following information is available in respect of Process
2 for the month of March :
1) Opening
stock – 1,000 units
2) Value
of opening stock –
Direct Material –
Rs. 6,000
Direct Labour – Rs. 350
Production Overheads – Rs. 800
3) Transfer
from Process 1 – 16,000 units at Rs. 81,000.
4) Transfer
to Process 3 – 14,500 units
5) Direct
Materials added to Process 2 – Rs. 43,750
6) Direct
Labour incurred – Rs. Rs. 14,300
7) Production
Overheads absorbed – Rs. 28,500
8) Units
scrapped – 500 units (DOC – Materials 100%, Direct Labour – 60%, Production
Overheads – 20%)
9) Normal
loss was estimated at 5% of the production units and realised Rs. 5 per unit
10) Closing
Stock – 2,000 units (DOC - Materials 50%, Direct Labour – 20%, Production
Overheads – 20%)
Prepare the process account and other statements using
weighted average cost method.
Example 17 : (HW)
From the following information for the month of October 2012.
Prepare Process III Cost Accounts :
|
Opening WIP in Process III |
1,800 units at Rs. 27,000 |
|
Transfer from Process II |
47,700 units at Rs. 5,36,625 |
|
Transferred to warehouse |
43,200 units |
|
Closing WIP of Process III |
4,500 units |
|
Units scrapped |
1,800 units |
|
Direct material added in Process III |
Rs. 1,77,840 |
|
Direct wages |
Rs. 87,840 |
|
Production overheads |
Rs. 43,920 |
Degree of completion :
|
|
Opening stock |
Closing stock |
Scrap |
|
Material |
80% |
70% |
100% |
|
Labour |
60% |
50% |
70% |
|
Overheads |
60% |
50% |
70% |
The normal loss in the process was 5% of the production and
scrap was sold @ 6.75 per unit.
Example 18 :
A company manufactures a product which involves two
consecutive processes viz. Pressing and Polishing. For the month of September,
the following information in available :
|
Particulars |
Pressing |
Polishing |
|
Opening stock |
-- |
-- |
|
Input of units in process |
1200 |
1000 |
|
Units completed |
1000 |
500 |
|
Units under process |
200 |
500 |
|
Materials cost |
Rs. 96,000 |
Rs. 8,800 |
|
Conversion costs |
Rs. 2,88,000 |
Rs. 52,000 |
For incomplete units in process,
charge material cost at 100% and conversion costs at 60% in the Pressing
Process and at 50% in the Polishing Process. Prepare a statement of cost and
calculate the selling price per unit which will result in 25% profit in sale
price.
Example 19 : (HW)
AMS Limited is a peanut oil manufacturing company. Data
relating to work done in Crushing Process to extract the crude oil from raw
peanuts during the month of January 2018 is given below:
a) Opening
stock of Work in Progress (2,000 kgs. of peanuts)
Materials – Rs, 80,000 (100% complete) Labour – Rs.
15,000 (80% complete)
Overheads – Rs. 45,000 (80% complete)
b) Raw
peanuts introduced in the Crushing Process – 38,000 kilograms @ Rs. 40 per
kilogram
c) Direct
Labour in Crushing Process – Rs. 3,58,000
d) Overheads
incurred in the Crushing process – Rs. 10,74,000
e) Expected
Normal loss in the Crushing Process – 5% of total input. This waste can be sold
@ Rs.6.70 per kilograms
f) Closing
stock of Work in Progress in Crushing Process – 2,500 kilograms
Degree of completion
- Materials 100%; Labour and Overheads – 80%
g) Crude
oil transferred to the Refining Process – 35,000 kilograms
h) Degree
of completion of Units scrapped - Material – 100%, Labour and Overheads – 80%
You are required to make:
1) Statement
of Equivalent Production
2) Statement
of Cost per Equivalent Unit of Production
3) Statement
of Evaluation
4) Crushing
Process Account
(F.Y.B.B.A – Final Examination – April 2018)
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