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Microlesson · 5-min read

Statement of Cost and Apportionment of Cost

# Statement of Cost & Apportionment in Process Costing

## Default Assumptions for Incomplete Information

When the question does not specify the degree of completion:

  • Abnormal Loss and Abnormal Gain are assumed to be 100% complete for all factors (Material, Labour, Overheads).
  • Closing WIP: If the work done is not given for abnormal loss, abnormal gain, or closing stock, always treat them as 100% complete.

## Statement of Cost (Per Equivalent Unit)

The statement of cost is used to compute the cost per equivalent unit for each factor of production.

FactorTotal Cost (₹)Eq. UnitsCost per Unit (₹)
MaterialTotal cost (–) Sale of Normal Loss unitsxxxx
Labourxxxxxxx
Overheadsxxxxxxx

### Treatment of Sale Value of Normal Loss

1. Only one material is given → Reduce the sale value of normal loss scrap from that material.

2. Two types of material given → Reduce sale value of normal loss only from Material 1.

3. Costs related only to Finished Goods (e.g., packaging) → Add such costs only in the Finished Goods A/c, not in the statement of cost.

## Statement of Apportionment of Cost

Once per-unit cost is found, apportion total cost to Finished Goods, Abnormal Loss and Abnormal Gain:

ParticularsFactorEq. UnitsCost per UnitTotal Cost
Finished GoodsMaterial / Labour / OHxxxxxxx
Abnormal LossMaterial / Labour / OHxxxxxxx
Abnormal GainMaterial / Labour / OHxxxxxxx

Each row's three components (M, L, OH) are summed to give the total value of FG, Abnormal Loss and Abnormal Gain respectively.

Worked example

### Example 1

Illustration — Treatment of Scrap Sale:

Input: 10,000 units. Normal loss = 5% of input, sold at ₹2/unit. Material cost ₹50,000; Labour ₹20,000; OH ₹10,000. Output = 9,000 units (no closing WIP).

  • Normal loss units = 500; Scrap value = 500 × ₹2 = ₹1,000.
  • Equivalent units = 10,000 − 500 = 9,500.
  • Material cost per unit = (50,000 − 1,000) / 9,500 = ₹5.158
  • Labour per unit = 20,000 / 9,500 = ₹2.105
  • OH per unit = 10,000 / 9,500 = ₹1.053
  • Total per unit ≈ ₹8.316

⚠️ Common exam mistakes

  • Reducing the scrap value of normal loss from total cost (all factors combined) instead of only from the material cost.
  • When two materials are present, deducting the scrap value from Material 2 (or both) instead of only Material 1.
  • Forgetting to treat Abnormal Loss / Abnormal Gain as 100% complete when the question is silent.
  • Including FG-specific costs (e.g., packing) inside the statement of cost instead of charging them only to the Finished Goods account.
Reference:
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