Page 26 - Cost Accounting - Ready Reckoner

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The following points are to be noted:

Inputs Degree of Completion
Opening WIP % of Completion done during this period is booked.
For eg: if R.M is 40% already complete, 60% is considered
as completed in this period .
Input Units 100%. Complete and transferred.
Normal Loss NIL (Normal loss will not be processed)
Abnormal loss/ 100% complete in the absence of information.
abnormal gain
Closing WIP The given degree of completion is taken as such.
At the end of Step 1, we arrive at equivalent units for every element of cost.

If weighted average method is followed, degree of completion of opening WIP
units is not considered. Units transferred to next process is taken on an average @
100% complete.

If it is a mid-way process for which statement of equivalent production is
prepared, there will be two materials. Material 1 and Material 2.

Material 1 is input from earlier process which will be 100% complete in all
aspects and Material 2 is the input of that production process for which degree of
completion shall apply.

Step 2: Statement of cost per equivalent unit

Cost per equivalent unit is found for every element of cost. For raw materials, scrap
realisation is reduced and cost/ equivalent unit is found for net cost.

Step 3: Statement of Valuation

With the found cost/ equivalent unit, the values of abnormal loss/ gain, closing
WIP, units transferred to next process or to FG A/c is arrived.

Step 4: Preparation of Process A/c.

A process A/c is prepared with the found values and it should tally.