Process account is the account which is made for calculating the cost of specific process. We show the material cost, labour cost and overhead cost in the debit side of process account. Its total will be transfer to next process. If there is the last process, then last process account’s total debit side total will be transferred to finished stock account.
Neo Pharma process a product through three distinct stages, these production of on process being passed on to the next process and so on to the finished product. Details of the cost incurred in each process are given below.
The overhead expenses or the period amount to Rs. 3600 and is to be distributed to the process on the basis of direct wages.
There were no stocks in any of the process either at the beginning or at the close of the period.
Assuming the output was 1000 kilos, show the process cost of A, B and C indicating also the cost per kilo of each element of cost and the output in each process.
If 10% of the output is lost in storage and giving samples, what should be the selling price per unit to make a gross profit of 33.33% on the selling price.
Process A Account
Process B Account
Process C Account
If 10% is lost
Total Output = 900 Kgs
Total Cost = Rs. 8300
Cost Per Kg = 8300 / 900 = Rs. 9.22
Selling Price to earn 33.33% on Selling price
Cost price = 100 - 33.33 = Rs. 66.67
If cost is Rs. 66.67, sale value = 100
If cost is Rs. 1, sale value = 100 / 66.67
If cost is Rs. 8300, sale value = 100/66.67 X 8300 = 12449.37
Selling price per unit = 12449.37/900 = Rs. 13.83
Neo Pharma process a product through three distinct stages, these production of on process being passed on to the next process and so on to the finished product. Details of the cost incurred in each process are given below.
| Process A | Process B | Process C | |
| Raw Material | 1000 | 800 | 200 |
| Direct Wages | 500 | 600 | 700 |
| Direct Expenses | 150 | 250 | 500 |
The overhead expenses or the period amount to Rs. 3600 and is to be distributed to the process on the basis of direct wages.
There were no stocks in any of the process either at the beginning or at the close of the period.
Assuming the output was 1000 kilos, show the process cost of A, B and C indicating also the cost per kilo of each element of cost and the output in each process.
If 10% of the output is lost in storage and giving samples, what should be the selling price per unit to make a gross profit of 33.33% on the selling price.
Process A Account
| Debit | Amount | Credit | Amount |
| Raw Material | 1000 | Process B Account | 2650 |
| Direct wages | 500 | ||
| Direct Expenses | 150 | ||
| Overheads | 1000 | ||
| 2650 | 2650 |
Process B Account
| Debit | Amount | Credit | Amount |
| Process A Account | 2650 | Process C Account | 5500 |
| Raw Material | 800 | ||
| Direct Wages | 600 | ||
| Direct Expenses | 250 | ||
| Overhead | 1200 | ||
| 5500 | 5500 |
Process C Account
| Debit | Amount | Credit | Amount |
| Process B Account | 5500 | Finished Stock Account | 8300 |
| Raw Material | 200 | ||
| Direct Wages | 700 | ||
| Direct Expenses | 500 | ||
| Overhead | 1400 | ||
| 8300 | 8300 |
If 10% is lost
Total Output = 900 Kgs
Total Cost = Rs. 8300
Cost Per Kg = 8300 / 900 = Rs. 9.22
Selling Price to earn 33.33% on Selling price
Cost price = 100 - 33.33 = Rs. 66.67
If cost is Rs. 66.67, sale value = 100
If cost is Rs. 1, sale value = 100 / 66.67
If cost is Rs. 8300, sale value = 100/66.67 X 8300 = 12449.37
Selling price per unit = 12449.37/900 = Rs. 13.83
i am confused in how we do this overhead ,,how is it been distributed
ReplyDeleteit's by the use of direct wages bases, means 3600 will be distributed bases on their direct wages, the higher the wages the higher the amount of overhead to any process vice versa
DeleteHardeep sharma
ReplyDelete