Model: Equivalent production – Average cost method
The process inventory in Process No. 2 at the beginning of the period was valued at Rs. 5,900 made up of Rs. 2,800 towards materials; Rs. 2,000 towards labour; and Rs. 1,100 towards overhead for 100 units. The value added during the period was Rs. 1,07,200 towards an introduction of 4,100 units from the previous process besides Rs. 81,600 towards labour and Rs. 38,800 towards overheads. Out of 3,600 units completed, 3,300 units were transferred to the next process leaving the balance in stock. About 400 units were held back in the process with half completion towards labour and overheads while 200 units were lost in the processing considered normal and hence should be borne by the entire inventory. Prepare a cost of production statement using average cost basis.