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0% found this document useful (0 votes)
64 viewsFast Track Reference of Cost
It is useful for chartered accountants
Uploaded by
Anmol poudelCopyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF or read online on Scribd
/ 16
| Variability based
© Fixed. + Materials. © Direct
Variable + Labour © Indirect
+ Semmi-Variable~ + Expenses
Cause & Effect based | | Decision-making based_ Attributability based
+ Engineered * Relevant © Product.
+ _ Discretionary + Irrelevant, Period
FORMAT OF COST SHEET
Particulars &
pening Stock of Raw Materials
Purchases (including Carriage Inwards, Transit Insurance ete.)
‘Closing Stock of Raw Materials
Direct Materials Consumed / Raw Materials Consumed
Direct Labour
Direct Expenses
PRIME COST
Factory Overheads (also called Works OH / Manufacturing OH / Production OH)
‘GROSS FACTORY COST / GROSS WORKS COST
Opening Stock of Work-in-Progress
‘Cosing Stock of Work-in-Progress
FACTORY COST / WORKS COST
‘Quality Control Cost (if any)
Research and Development Cost (if any)
‘Administrative Overheads relating to Production Activity if any)
Less: Credit for Recoveries / Scrap / By-Products / Miscellaneous Income
Cast of Primary Packing
‘COST OF PRODUCTION
al oa
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‘Re-Order Level - (minus) (Average Usage Rate x Average Lead Time
Rete ne Re One arty sas mom Usage Rate 3 in Led Tne]
4, Naximum Levels Minimum Level tg)
; @
2, Minimum Level + Ya of Re-Order Qtty [or]
‘5, Opening Stock + Closing Stock
“ 2
1. Min, Usage Rate x Min. Lead Time for]
2. Avg, Usage Rate x Min. Lead Time [or]
3,__Minimum Usage Rate x Average Lead Time
Where A = Annual Requirement of Raw Materials (in units).
Buying Cost per order.
~___C= Carrying Cost per unit of Raw Materials per annum.
(@) Associated Costs of EOQ
= Buying Costs p.a. + Camying Costs p.a.
= (No, Of Orders x Cost per Order) + (Average Inventory x Carrying Cost p.u. pa.)
(0) Associated Costs of EOQ may also be computed as = /2ABC
{€)_ At EOQ under Wilson's Formula, Buying Costs p.a.=Carying Costs p.a.= Va of Associated Costs p
Sep} —————Somputation of
[ Step |
a_| Determine various Order Sizes by Til and Error. The rules (o be folowed are = (a) One representation should
ven for every price, and (b) Lower mit of every class interval should be chosen.
Find the number of orders for each Order Size chosen above. No. of Orders = Annual R
‘Compute Buying Costs per annum = Number of Orders x Cast per Order.
Compute Average Inventory = Vs of Order Se = Ys of Step 1.
Compute Carrying Costs per annum = Average Inventory x Carrying Cost per unit pa,
Costs p .
Associated Cost
Determine Costs of Purchase pa. for each price.
Comput Total Costs pa. = Associated Costs + Costs of Purchase = Step 6 + Step 7.
Decision: relating to Least Total Costs pa shall be selected as the EQ.
Purchase p.a. under Step 7, Discounts received p.a. can also be considered. In Such case,
“Average Stock of Raw Materials ‘Average Quantity of Raw Materials in
Note: Cost of Raw Materials Consumed = Opening Stack + Purchases ~ Closing Stack
Average Stock of Raw Materials = Ya x [Opening Stock + Closing Stock]
4. Treatment of Idle Time Cost
| Cost of Normal Idle Time is treated as a regular part of cost of production,
| Itis treated —
2 Loss, and debited to Costing
either as Direct by inflating the Wage Rate (for Direct Work: resp
is pan am . rect Workers) or | If it is controllable,” the:
FTR2,
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2. Treatment of Premium
‘Treatment of Overtime Premium
“Treated as Regular Cost of Production, as Direct Labour, by
inflating normal wage rate. we
7 to the Job di ‘Such amount wil aot,
fccastomer® dese, 9, immediate delivery, ete. Cae se ih arc is higher robe
Treglr overtime to meet production requrements due ‘Charged to Job ~ treated as Factory Overheads.
Due to fault of 2 particular department, e.g. non=| Charged to the department in default, in order to fix
aby f mate ng nomal tne responsibilty and prevent recurrence.
‘Charged to Costing Profit and Loss Account 4s Loss.
3. Computation of Labour Turnover Rates,
Tumor Without Expansion Labour Tumover With Expansion
1. Separation Method: =
2. Accession Method: afk
B. Mixed Method! 3. Flux Method:
= Number of Separations, R = Number of Replacements, N= Number of New Recruitments,
= Number of Accessions= Replacements + New Recruitments, (or)
Number of Workers at the end + Number of Separations (-) Number of Workers at the beginning.
E = [Number of workers at the beginning + Number of workers at the end)
= Average Labour Force 2
4. Computation of Labour Productivity or Labour Efficiency
(@) Based on Time: (b) Based on Output:
Actual Output produced
___Standard Time allowed for Actual Output =
r “~~ ‘Standard Output for Actual Time worked.
‘Actual Time taken
__5. Computation of Wages under different Wages and Incentive Schemes.
Formula for Wages
‘Total Wages = Actual Hours Worked x Rate per hour.
Total Wages = Actual Hours Worked x Rate per hour. (Rate is based on Workers efficiency)
Total Wages = Actual Hours Worked x Rate per hour. (Rate is higher than industry average)
Total Wages = Actual Hours Worked x Rate per hour. (Rate has Fixed and Variable Components)
Total Wages = Actual Units produced x Rate per piece.
‘Total Wages = Actual Units produced x Rate per piece, where Rate per piece is as under—
Efficiency less than 100% 83% of Normal Piece Rate
Efficiency equal to or more than 100% 125% of Normal Piece Rate
“Total Wages = Actual Units produced x Rate per piece, where Rate per piece is as under —
Efficiency upto 6396 ‘Normal Piece Rate
Efficiency above 83% but upto 100% 110% of Normal Piece Rate
Efficiency above 100% 120% of Normal Pece Rate
Total Wages is calculated as under —
Efficiency < 100% ‘Guaranteed Time Rate, ie. (Hours worked x Rate per hour).
Efficiency = 100% | Time Rate + 20% Bonus, ie. (Hrs worked x Rate per hour) + 20% thereon
Efficency > 100% | High Piece Rate, ie, (Actual Output x 120% of Piece Rate per unit)
< 66.67% | Guaranteed Time Rate, le. (Hours worked X Rate per hour)
Rate + Bont 1.01%
fein naan aria’ ee
Scanned with CamScanner 5 Students’ Handbook on Cast and Management Accounting ~ For CA Inter
E = —
}
Points
Total Wages = Basic + | 82sic | "Hrs Worked x Rate per hour ____Hours Worked x Rate per!
Bonus, and is
Bonus | 75% x Points Earned x Rate | Repetitive work: 5/6” x Points x Ra
‘calculated as under ~ er point z
Points _| Expressed in B's (Bedeaux’s) |
| Total Wages = Basic + Bonus, and is calculated as under —
System ce
Bask Component
Hrs Worked x Rate p.h. | :
eee Hrs Worked x Rate p.h. | aa Seal parte
a Aetual Hours ae
Rowan Hrs Worked > Rate ph. | Standard Hours__* T™€ Saved x Rate
Barth Total Wages = Rate per hour x {Standard Hours = ‘Actual|
Points Systems: Total Wages = Basic + Bonus, and is calculated as under ~
uapter 4 Overheads
Formula
in Total Costs
Variable Costs as a % of Sales Value = —rerence in Total Casts
Tee, | ¢ Vaile Costs at ether highest or lowest volume as Sales x Variable Cost % compute
Migiyand Low | + Fixed Costs = Total Costs less Variable Costs as computed above.
dhodyetc. | NOte! The above princple can also be used with Difference in Output Quantly of
Method, etc. Operating Hours n the Denominator (instead of Difference in Sales Value), to get
Der unit or Variable Cost per hour, as the case may be.
Type of OH means
Output
Meaning of | Factory OH | = Units sold + Closing Stock of Finished Goods + Closing Stock of WIP.
‘Output for OH [Admin OH
= Units sold_+ Closing Stock of Finished Goods.
S&DOH = Units sold aot
Absorption 1. Collection 2. Classification
Costing Steps | 4. Apportionment 5. Re-apportionment
‘Assumption
Service Departments do Not serve one another. Direct Distribution Method.
One Service Department serves the other, but dose Step Ladder Method, or Step Method
Not take back services in return, Non-Reciprocal Services Method.
Reciprocal Services Method —
Service Departments serve one another. * Repeated Redistribution Techn
and Error Techni
Simuitaneous
: minus Normal / Unavoidable
4 tendon soy canst Of a Plant, whichis expeced to be used che alo
based n sts I factors," CAPRCity = Practical Capacity rine Loss
Scanned with CamScanner otal OH ined
Machine related Direct Costs,
‘Overhead | 1 Direct Method (Based on Output): J =
Recovery 2, Indirect Methods: (a) Percentage of Direct Material, (b) Percentage of Direct Labour,
Methods {c) Percertage of Prt Cost (a) Les Machine Hour Rate.
Machine Hour ed
Rate Concepts
cy
= on ay
ata nA
‘Absorbed OF le qrestar Chan Actual Oh ‘Absorbed OH is less tha Actual OH
Gnas (Debit Balance in OH Control Alc)
betpmareny egy 2 UNDERABSORPTION
rene Senn cibeee Lngreerts rene Won Beenenee)
| nezomng Treen (any on ft fotowing) Anas 25 ue to
‘write Of: Small amounts maybe ‘Normal Reasons ‘Abnormal Reasons
credied t Casting PALA 49. genuine planning errors, 2g. Strike Period Wages,
2. Deferral: May be carried over to next | changes in assumptions, etc. Labour Court Award, Obsolete
‘yet, dy Dansfer to OH Reserve A/c or + ‘Stores, Penalties paid, etc.
Suspense AIC. ms tacot aie Treated as increase in COSTS
(Cost Reversal: In case, amounts, (using Supplementary OH ‘Treated as LOSS anc debited to
cont ot bbs war De AS Lea : Rovovary Rate), and ‘Costing P & L Account.
aoe tne ‘apportioned to production, ie.— (Also see Note below)
visi Coane ct cong kar
Deotesto ——> Cost of Sales A/c FG Control Ale WIP Control Ae
- bi uj
"ha oppeedh to the costing and monitoring of actives which involves tracing resource consumgton and
na | costing final outputs. Resources re assigned to Activities, and Activites, to Cost Objects based on
a cotimats, The later utilise Cost Drivers to tach Activity. Casts to Outputs. * =
Ti, Cost Object ~ Item for vitich cost measurement is required.
2. Cowk Driver: Factor that causes a change in the cost of an activity. Cost Drivers are asset 3s ~
(2) Resource Cost Driver: Measure of quantity of resources consumed by an activity & used to
‘assign the cost of a resource to an activity/ cost pool,
‘Cost Driver: Measure of frequency and intenty OF demand, placed on actos by
Scanned with CamScanner ),| 4 levels of activities, (a) Unit Level
Batch Level, (c) Product Level,
cl are'dentfied,
Activities and Causal Factors,
Activity-wise Cost Drivers id
Costs are assigned to Cost
Suitable for Cost Control.
Non-Value~Added activities
‘Additional and extraneous activities, not
necessary for product performance / utility.
If eliminated, this will not reduce the actual or
value customers obtain by using the product oF se
Work not valued by the external or internal customer:
NWA activities do not improve the quality oF function of
[They improve or maintain the quality or
| fon of produc. VA acts rest In product or service, NVA activities create waste, resul
delay of some sort. a
| "eosts” and not in losses.
Making product more versatile for certain | Expediting due to work delays, cost of
defectives, etc.
VA Activities and costs”. | To eliminate NVA Activities and avoid “losses”.
The use of ABC as a costing tool to manage costs at activity level is known as Activity
Management (ABM). ABM utlises cost information gathered through’ ABC:
) identification ofthe activites that have taken place inthe Firm.
(©) Assigning Costs to Cost Pool for each activity. 1
(6) Spreading of Support Activities Costs across the Primary Activities.
(G) Determining Cost Driver for each activity. J
(©) signing the costs of Activities to Products, according to product demand for Activites.
Susiness Applications of ABM: 1. Cost Reduction, 2, Activity Based Budgeting, 3. Business Proc
| Siouauin (PR) 4. Benchmarking 5. Perfrmance Messirement cs
Benefits 4. Cost Reduction, 2, h
me 2, ,Budoe Implementation, 3. Cast Deion, 4,
budget, that meets workload
{) Quantity, and (c) Cost of work / activity
eager Alsi (b) Better Cost Contra, (c) Ma
Scanned with CamScanner Grukripa’s Fost Track Referencer for Inter Cost and Management Accounting
(ing ABC, proftabilty can be analysed customer ‘ABC creates cost pools for activities.
Qapormers se som aces but hot ee py oe 9
| Deshad Conaar nesearacotanny Heo ei cgay andrea
ht of : A
Particulars / Product A 8 c ‘| Total
Sling Price per unt ep mp]
Bought-in-Price per unit me m 1 me)
‘Gross Margin per unit xtc foc} ee
Directly Attributable Product Costs | CPF | | 20K
1, Warehousing and Storage Costs ~ e.g, space, insurance ye} 06 fo poe fer 50
2. Transport Costs ~ 9. fuel, vehicle maintenance, labour 30} 200 pe" 00 pe 06 feo 30K
30C| 9206) 306) tae — 906
2% | tt [us 0h pnegOeefdt IOC
Mp XK Che vO OC
| ei
0
with
| hae. Receipt of Mersin Stores Ota en
stores Ledger Control | i), Repairs Work (Factory
1. | Account for] Raw Materials |" CSPtagetnware man | (i). Offer (Acminstration
ee + Materials Retumed from Production | , _) Sales Deparment Seliog OH),
! never: + Normal and Abnormal Loss of Materia.
1 Wages analysed into —
2. | Wages Control Account. ‘Wages Paid. = eaten,
i + Abnormal Idle Time / OT Wages, if any.
| Factory ‘Cando | PRO OH RCT LE, = + Factory OH absorbed to production, Le.
ale “i ae aa ore— ee transfer to WIP Control AVc.
2 + Adjustment for Underabsorption, if any.
| Indirect Expenses. ‘i es
T Factory Cost items of Jobs 1-6, = + Factory Cast of Production, Le. wansfer
+ Direct Materials, to Finshed Goods Control Account.
: Direct Wages, + Abnormal Loss in —_Production
ha Factory Overheads absorbed. Department, if any .
"ROH absorbed to goods produced or |
ua | transferred to Cost of Sales Ae: (Note)
+ Total Cast of Goods Sold, 2, transfer to
Com. of goods retumed:. by | .- coat or sees Reswnta
if any. Abnormal oss in Wareholise Fan
Selling and Distribution Overheads, S00 OH sheers a Ohh a
% to Cost of
Tell Con tS, es ta bade |
Scanned with CamScanner Padhuka's Students’ Handbook on Cost and Management Accounting ~ For CA Inter
Name of Account Debited with
* Sales made during the period,
1] oun om Aeutiment | "Net Loss for the period, any,
transferred from Costing P&L. A/c.
Note: AH related to Production Activity i transferred to Finished Goods Control Ac, while
transferred to Cost of Sales AVC.
Proforma of Memorandum Reconciliation Account
7 Particulars z Particulars
‘To Loss (if any) as per Financial Books b/fd ‘By Profit as per Financial Records b/fd
To Overheads ever~absorbed in Cost Books | By Overheads under—absorbed in Cost Books
~ Factory / Administration / SAD Overheads = Factory / Administration / S&D Overheads
To Non-operating Incomes Non-operating Expenditure, Income Tax,
Stee eemeeecinse | |” Me seeteten naece Cee
To Opening Stocks (RM, WIP, FG) under valued in By Opening Stocks (RM, WIP, FG) over valued
Financial Books Financial Books
To Closing Stocks (RM, WIP, FG) over valued in By Closing Stocks (RM, WIP, FG) under valued in
Financial Books Financial Books
‘To Profit as per Cost Records (bal. figure) By Loss (if any) as per Cost Records (bal,
Total
\Note: The above account may be considered as an extension of the Financial P & L Account. Hence, Financial Profit ist
‘on the credit side of this account. Debit / Credit approach to reconciliation as under — :
1. Identify the item causing ifference e.g, Production Overheads, Goodwill written-off etc
2 See whether the item relates to the Debit or Credit side of the Financial P & L Account. “
4.
3. Ascertain the direction ofthe change i.e. whether the amount is to be or reduced in
change unt is to be increased tuced in ordet to arrive
ee
Teheran 0 be increased, record the difference inthe same side, i the
a , record » if the amount is to
aes by pe ae ue [Refer Chapter 6 inthe Book for Reconeillation Decision table}
Scanned with CamScanner Gurukripa’s Fast Track Referencer for Inter Cost and Management Accounting
Work Certified = Progress Payments + Retention Money.
Income on a contract til date = Value of Work Certified + Cost of Work Uncertified.
Notional Profit = Income til date (Less) Expenditure til date on the contract.
ETP = Contract Price (Less) Estimated Total Costs on the contract.
[Note: Estimated Total Costs = Cost til date + Additional Costs to be incurred.)
using Notional Profit concept
ment
1 Cash Re cetved
26% to 50% + x Notional Profit x Cash Received
3 Work Certified
2 Cash Received
20% (See Note c) ey
SINT IM ) 5 * Notional Profi
‘18% — 9586 (See Note c) Profit is recognised on the basis of Estimated Total Profit
‘Cash Received
100% Notional Profit x ray (See Note d)
Work Certified
Contract Price
(0) If there is 2 loss at any stage, i.e. irrespective of percentage of completion, such Loss should be fully transferred to'the
Profit and Loss Account,
‘Substantially completed can also be considered as 51% to 95% completed. In such case, the next slab of Almost
‘Complete Contracts will be taken as 95% to 99% completed.
For fully complete contracts, the balance portion of profit is recognised only upon receipt of Retention Money. IF entire:
psd
{(2) Percentage of Completion =
‘amount is fully received, the whole of profit can be recognised.
(©) The principe of prudence / conservatism is generally followed for recognizing profit. Hence, for exact S0% completion,
1/3 of Notional Profit will be recognised (and not 2/3).
Profit Recognition on incomplete contracts using Estimated Total Profit: to etmostnatt
Note: Some general conventions in Profit Recognition for Management decision-making purposes are given below.)
of the following alternative formula may be used for recognition of profit —
wore CoENOO? he. ETP nt Completion
) Estimated Total Profit x se .e. ETP x Percentage of Completion
Work Certified . Cash Received of "
ib) Estimated Total Profit x ee Mote ‘ne. ETP x Percentage of Completion ge of men
seat tO dae Le. ETP of
(6) Estimated Total Profit x Tae ae .e. ETP x Percentage | oma ered
(6) Eat Total Profcs<-Co8 date Cah REGEN. g,ETP x age cf Cost ncued > Shage of Payment
Estimated Total Costs Work
Work Certified ‘.e, Notional Profit of ‘
(6) Wational Prof « ais Percentage of Completion:
3 « national Prot x Cash Re (see Note’a) Le, Formula relating to Substantial Com
Note: omunedmpick soos pee
|. ETP based formula can be applied ~ pubic? =
=
e
(2) for almost complete contracts (91% ~ 99%), OF
(0) for eny other contract te fare
In the absence of any
Scanned with CamScanner ‘Current
Estimated Total LOSS | for in the current Vear.
Output / Unit
nit 7s applied in situations where: “Standardised Product(s) is / are pro
im pe Output is identical, and ‘each unit of 0 requires ‘cost.
Sa or 2 few variants of a single output Barbie Q
tO srimary Focus Area Is preparation of Product Cost St
jcable for Job Costing as in Chapter 7.
Costi
Formula
Prysical Quantities Method, 2, Average Unit Cost Method, 3, Survey/Technical
‘Wethod, 4, Contribution Margin Method, and 5. ‘Market Value Methods ~ (a) Sale Value,
‘Of Point, (b) Sale Value after Further Processing and (c) NRV at plit Off Point
Cost Recognition Methods - (a) Market Value, (b) NRV, (©) Standard Cost, (d) Co
Price, and (e) Re ~ use or Opportunity Costs
2. Revenue Accounting ~(a) Low, (b) Moderate, and (c) High Revenue situations
Further Processing Decisions
Procedure
(Revenue = Sale Value after further Processing Less Sales Value at Split off. 2a
Compite haciionel Costs = Further Processing Costs + 5 & D OH if 7
Scanned with CamScanner _
Gurukripa’s Fast Track Referencer for Inter Cost and
BB: COST ANALYSIS
Procedure |
oat Debit econ,
‘Gross Cost, \e. Total of Debit Sie of Process
b._Gross Input ie, Toal Ir ta Phan.
ermine Normal Loss Quantity, and Scrap Value, If any, of Normal Loss,
‘Compute =
{@) Net Cost = Gross Cost Less Scrap Valve of Normal Loss,
b)_Net Expected Output = Gross Input Quantity Less Normal Loss Quantity.
‘compute Effective Cost per unit = Net Cost_. Step 3(a)_
:. ny ear Saray (Tiss called as Good Unt Rats)
(¢: VALUATION: The various items are valued as under~
Ttem
Basis of Valuation
‘nits Produced & Transferred _| Effective Cost per unit as per B(4) above.
Value only.
Effective Cost per unit as per B(4) above. (Note: Abnormal Loss is considered as
‘Deemed Good Production, and is valued, as if t were good units
Effective Cost per unit as per B(4) above. (Note: Abnormal Gain constitutes Actual
(excessive) Good Production.)
Sage: ScRaP REALISATION ENTRIES (Abnormal Loss / Gain Accounting) 4
Ttem Treatment
Debit with Normal Loss Quantity and Scrap Value thereon.
Credit with amount realized by way of sale of scrap.
When Process Loss < Normal Loss, the difference is transferred to Abnormal Gain A/c.
Debit with Abnormal Loss Quantity and Cost thereon at Effective Cost pu, as per Process A/C.
Credit with amount realized by way of sale of scrap.
‘Net Abnormal Loss is transferred / debited to Costing P & L Alc.
CCreait with Abnormal Gain Quantity and Value thereon,
3 | Arnormal Gain A/c'"| «Debit / Adjust Normal Loss Scrap Value, when Process Lass < Normal Loss:
1 2. Net Abnormal Gain is transferred / credited to Costing P & LAC.
Equivalent Production: The following steps are involved —
Tnput — Output Reconciliation of quantities on physical bass.
‘Step 2 | Determination of Percentage of Completion and Computation of Equivalent Production.
‘Step 3__| Computation of Cost per equivalent unit.
| [seep 4 [Apportionment of Total Cost over Production, Abnormal Loss and Cosing WIP.
Step 5 _| Preparation of Process Account.
ad Before apphing the Bbove steps, Students are first required to decde on the following =
* etn of Valuation dC) dere of comoleion for Opeing WIP shen and (1) Cost break of
(0) OO oe used = () degre of comoletion for Openina WIP not aver, and) Cost break-up of
‘Opening WIP is given.
+ fa) For bn Pt Process the Coat Elements ae ~ () Mater (I) Labour and (i) POH,
() For any Subsea ros, Elements ae () Matra Ae, wasted mate fom the revs
Abnormal Loss
‘Abnormal Gain
|
i Normal Loss A/C
2 | Abnormal Loss A/c
; "= Opening WIP units + Freshly introduced units.
{@) Compute Total Input during the pened = OPT centage of Total Input oF (i) Percentage of
o Sete Ne meat sce ot
© Quantity process, and classify it into ~ (i) Transfer from Opening
based
Pel wir
ants, (Note: Ths cassfcation is only for FIFO, and not for WAC Method).
sa los ‘and compute Abnormal Loss / Gain afig
Scanned with CamScanner _ Badia’ Stents Handbook on Cost and Management Accounting ForCAnter
Percentage of Completion =
aS ee
(@) Transfer to next process out of —
[Spame Wet 100% Less Percentage
nce Per
(i) Fresh Units introduced | ‘
{-(0) NorveL Loss Se ans
|e) Abnormal Loss| 4909 (generaly) or as spected nthe Question fo
o wid ‘As specified in the Question.
{e) Abnormal Gain, if any Too%% (quand writen within brackets to slgrify
(a) This is obtained by dividing the Cost (Materials, Labour & POM) by the respective equivalent
(8) Scrap Value of Normal Loss, If any, is reduced from the Cost of Materials. In. ase of Second g
Process, it is reduced from Cost of Material A, Le, Previous Process ‘Raw Material.
{© Under WAC Method, the Total Cost (Opening WIP Cost + Current Cost) is determined
calculating the Cost per Equivalent Unit
“Total Cost is apportioned over Production, Abnormal Loss and Closing WIP by ‘multiplying the
‘equivalent units at the appropriate Cost per Equivalent Unit. a “4
“Costs are debited to the Process Account. The credit side is updated using the fagures Cesmrmenesly
‘Step 4 sbove. Under FIFO method, Cost of Production consists of Cost of Opening WIP and Cost
Processing during the period. ==
Note: 4
D> Under FIFO Method, in case of Second oF Subsequent Processes, Material A is regarded as 100% complete
‘respects, except for transfer out of Opening WIP units and Normal Loss. -
- Unser WAC Method, tol transfer to next process's taken as 100% complete. Break-up between Opening WIP an
fresh units introduced, isnot considered.
ae
= Absolute (Weighted Average) Tonne - Kilometers: Each Route Distance x Respective Load Quantities,
‘ al (Simple Average) Tonnes ~ Kilometers: Toa Distance (ie. Kms) x Average Load Quantity (To
fuer
sot d
(4)
weg | _____n
Material Yield Variance + Material Mix Variance + Material Price
= SQ SP~RAQ « SP = RAQ = SP~ AQ = SP = AQ x SP- AQ «AB
a Plein Se ae la
Material Usage Variance + Material Price Variance b/fd as 7
; v4 = SQ «SP AQ SP above
i ane Total Material Cost Variance
" ‘= Standard Material Cost ~ Actual Material Cost
Scanned with CamScanner _______Guutripa’s Fast Track Referencer for Inter Cost and Management Accounting
pag = Revised Actual Quantity, (See Note)
‘Material Purchase Price Variance. It is computed as ~
= actual Quantity re-written in standard proportion, ney 2s 00 he
‘sp __~ Standard Price per unit of material consumed. | Where Pq] = Purchase Quantity,
$e = Actual Price per unit of material consumed, SP = Standard Prices, and AP. = Actual Prices.
Note: RAQ can sometimes be referred as RSQ (Revised Standard Quantity), =~*S*=
