 So, dear students, in last 2-3 sessions, we are discussing about accounting for various costs to take a very, very brief recap. In the beginning, we discussed about what is cost accounting, then cost classification and then we are looking at accounting for the costs, that is recording of various costs. So, in the cost classifications, we had discussed one important classification, that is direct and indirect, which is very relevant for recording. So, do you remember what was discussed as a direct cost? As name suggests, it is direct, in a sense it is exclusive or it can be specifically related to a particular cost center. Such costs are known as direct costs. So, in step number 1, when you are trying to account for the cost, first you try to segregate all costs into direct and indirect and that is known as cost allocation, if you remember. So, in cost allocation, all the costs which are direct are charged to the cost centers directly and there is a common pool, which is known as overheads, which cannot be charged, that remains. Step number 2 is apportionment, do you remember what is apportionment? So, in apportionment, this common pool is charged proportionately to various cost centers on some reasonable estimate, like rent may be charged based on floor space and so on. What is the stage number 3? So, step number 1 is allocation, step number 2 apportionment, step number 3, what it is do you remember? It is reapportionment, because the cost which is collected at a service cost centers needs to be charged again to production cost center. For example, expenses or canteen or expenses on maintenance, they are charged to production cost centers. So, allocation apportionment, reapportionment number 4 is absorption. So, you remember now what is absorption? In absorption, we essentially charge the cost from cost centers to cost units or the products based on some logical basis. So, we have discussed that one of the popular basis is machine hour rate. So, if you have the total cost at a cost center and you do the number of machine hours, you divide the cost by machine hours and get a machine hour rate. So, every product passing through the cost center will be charged a particular rate based on the machine hours consumed in that department or the cost center. So, absorption is a process where the costs are charged to the products or to cost units. So, this was step number 4. Step number 5 is under or over absorption. So, actual costs when they are available, they are compared with the absorbed costs. Because absorbed costs are based on the budget, they are pre-determined. So, they are compared with actuals and the difference is under or over absorption. I hope you have understood up to this and we have done up to this. Now, let us go to stage number 6. Now, having calculated the under and over absorbed amount, what will you do with it? So, what can be done? If you remember, we will go to the example which we discussed last time. So, we had discussed about this company D and B in the last session. So, here you can see that for company D, there was under absorption to the tune of 25,000. So, actual cost was 4 lakhs. Our system is to charge the cost at 75 percent of actual labor cost. So, 5 lakh into 75 percent. So, we have charged 375. There is under absorption to the tune of 25. Now, in the accounting system, the cost recorded is 4 lakh whereas to the customers, you have charged only 375. So, 25,000 will remain as under absorbed. Now, question is what will you do with this 25,000? Who will bear this cost? Do you charge more on those same products or should it be charged and borne by the company as a common pool? That decision will have to be taken and that is our stage number 6. So, what do you feel? What could be the right way? I hope you remember the sum. Otherwise, you can take a look at the sum again and think over what can be done. So, as far as department D is concerned, the budget was 3 lakhs. So, the cost is 4 lakhs, no problem. But of that 4 lakh also, since the budgeted labor cost is 4 lakhs into 75 percent, so I could absorb only, sorry budget actual labor cost is 5 lakhs. So, into 75 percent, so I was in a position to absorb 375 whereas the actual cost incurred is 4 lakhs. So, what to do with this 25,000? One possibility is instead of 75 percent, which is the rate we are charging now, rewise the rate, so that the balance of 25 also can be absorbed, are you getting? So, because we charged at 75 percent, we ended up with the balance of 25. So, one possibility is instead of 75, say calculate at 80 percent. So, that will take care of the difference. This method is known as supplementary rate. So, 75 percent is a basic rate, which is predetermined, charge extra by following additional or supplementary rate. Of course, supplementary can be negative also. You can see in case of product, company B, there is a under absorption of 250,000. So, if you look at company B, they follow a rate of 2.5 per machine hour. So, these are their budgeted figures. So, 5 lakh was the budget of machine overheads and 2 lakh was a budget of machine hours. So, 2.5 was the rate. We applied 2.5 on the actual machine hours, which were 3 lakh. So, absorption was to the tune of 750,000. Actual overheads are less, they are only 5 lakh, but their absorption was 750. So, there is over absorption of 250. That means, the rate of 2.5, which they charge is excessive. So, they may have a negative supplementary rate. So, if they find that instead of 2.5, they could have charged only 2 rupees. They can have minus 0.5 as supplementary rate. Actual are different. I am just giving you an example. So, supplementary rate could be positive or negative. But what I am trying to convey is one way of making the correction is to have a supplementary rate. Can you think of any other way of correcting it? There are three ways totally. So, one is supplementary rate. Other is do not make any corrections at all, in which case this 25,000 which have to have to be born by the company, it will be charged to their costing profit and loss account. Means it is not charged to any product, it will be simply born by the company. This is method number 2. Method number 3 is you carry over this 25,000 to next period. So, these three methods are used. Now, which method is suitable in which case? I will just show you PPT, so that methods are more clear to you. So, we had talked of these two methods. First, as application of supplementary rate, so this rate is calculated by dividing the overall under absorption by the actual base. The second is writing off to costing piano and third is carry forward to subsequent periods. Now, what happens is, if the amount of difference is too small, there is no point in making recalculation of supplementary rate and making changes in all the cost sheets, etcetera. Because amount is very small and it can be very much born by the company. So, in such cases, it is charged to costing piano. Secondly, sometimes the amount is caused due to abnormal causes. Let us say, due to accident, due to fire, you cannot charge it to the customers. You have to born it. So, one when it is too small or one when it is due to abnormal reasons, it is charged to costing piano or it is written off to costing piano and it is called. So, it is not charged to any product. Sometimes it is due to seasonal fluctuations, particularly when you are doing monthly calculation, it may happen that in a particular month, there is over absorption. In the next month, there is a under absorption. So, there is no need to charge. It will simply get adjusted as you go over. So, in such cases, it is carried forward to subsequent period. Now, if both this is not being done, supplementary rate may be used. I hope the three methods clear to you, but we will look at the cases. So, I would like to go back to question number 4, which you have done. Please have a look at question number 4 again. So, I am directly going to solution. So, 360 was the overhead cost, 180 was the budgeted machine hours. So, we had budgeted 2 rupees per machine hour as a predetermined rate. Now, look at the month of April. In the month of April, the actual cost was 23. Actual machine hours were 15. So, there was an absorption of 30. So, there was an over absorption of 7. If you look at the month of May, the actual cost increased to 41. The absorption is 40. So, there is an under absorption of 1000. So, which method could be recommendable? Perhaps, you can see that 2 rupees is an annual rate. There may be some monthly fluctuation and if that fluctuation is getting adjusted, we can simply carry it over from April to May, May to June, so on, which generally it should get adjusted by the end of the year. So, in some cases, carry forward becomes suitable. If we feel that in the month of April, there is too much of over absorption and it is not abnormal. It is better to pass it on to the customers. We may go for supplementary rate. But if we feel that this is due to some abnormal cost, then instead of supplementary rate, we can go for writing it off to P and N. So, looking at the circumstances, the company has to decide what method can be most suitable. Let us look at one more case, which will make it further clear to you. So, this is the data again of the problem number 4 only. So, you have to compute over and under absorption and also find the supplementary rate. So, we have actually already done over and under absorption. So, just now as we saw, 2 rupees per machine hour was the rate. There is an over absorption of 1000 in May and under absorption of 7000 in April. Now, how will you calculate the supplementary rate? We have to look at the actual base, which is 15000 and 20000 in those months. So, 7000 we divide by 15, we get a rate of 0.4664. So, there is an over absorption. So, this rate can be negative. So, instead of 2 rupees, which we have already charged, we could have charged something like 1.53. So, we will charge minus 0.46 now to even it out. In the month of May, you can see 1000 was under absorbed, 1000 upon 20000. So, it comes to 0.05, which is positive, are you getting? So, this is how supplementary rate can be calculated and we just now discussed that 1000, if we feel is too less, so rate will be also 0.05, it may not be worth it to make all the changes, we can simply write it off. And this is significant, so we may go for supplementary rate. So, company has to take a call. So, this was about accounting for over and under absorption. So, I hope there is a clarity now on module number 9, we will go to module number 10 now. Now, I think briefly you have understood what is cost accounting, we have also discussed the classification of cost and we have discussed recording for the cost. In module number 10, we are going to discuss about calculation of product and process costs. There are two prime methods of costing, one is known as job costing, the other is known as process costing. Of course, many times companies use lot of combinations of this, but just for clear understanding, we assume that there are two distinct methods and there are some special features for job costing, there are some special features for process costing. Now, looking at the nature of industry, management has to take a call, which is a more suitable method of costing for them. As I said, actually for some part they may go for process, for some components they may go for job and so on. So, they may use a composite method, but for more clarity, we will look at the characteristics of both the methods and also see the advantages and disadvantages of both the methods. So, we are discussing about product and process costs. In this presentation, we are going to talk about product costing, in that you have job and process costing, what is the cost sheet, what are the costing procedures, the treatment of loss about the equivalent units, which is particularly required in process costing and in the end, we will discuss about operation costing. So, product costing is very important in financial accounting, it is mainly used for valuation of inventory and to compute the cost of goods sold. In cost and management accounting, it is even more important, because apart from inventory, it is very much useful for planning, controlling, directing and managing of various decisions. So, it is very important that we are able to get a fair cost of our own product, because our decisions like pricing are based on that, if we want to make a make or buy decision, it is based on that. We would like to definitely control our cost, so we should be able to calculate the correct cost, so that we can compare and control. So, many of the control as well as decision making functions are based on right product costing. Now, here in product cost, especially in manufacturing concerns, the cost for completing product becomes important and that is what is treated as an asset in the balance sheet, because the stock becomes or the inventory becomes one of the important assets. Now, as we discussed in the beginning, there are two major methods for product costing. One is process costing, the other is job costing. These are the features of process costing. It is mainly used for large scale mass production of identical items. So, production processes here are continuous in nature. You cannot trace a piece of input to output, because inputs are continuously being pumped in, they are getting processed together and output comes out from the factory. Maybe there are different products coming out from the set of processes, number of inputs are going, number of outputs are going. So, you cannot directly relate any input to output and usually the production is automated on a large scale. Items, typical units could be slow cost or small items, so which industry you feel process costing is a right scenario, just think of. As against this, there is a job costing. Let us say, there is a, I will give you four or five examples. You can tell me whether it is suitable to use process costing. Let us say, plastics, cement, steel, construction, transportation and consultancy. In which industry is the process costing will be more suitable? I will repeat, plastic, steel, construction, transportation, let us say oil refining. Which industries have characteristics suitable for process costing? In large production like steel, can you identify for which customer you are making steel? No, it is being made true of continuous process. Same way in refining or FMCG, say you are making soaps. Can you identify this soap is for which customer? No, certain chemicals are being put into soap manufacturing and you get soap cakes out of it or you may be getting other by-products. But there is no one to one correlation from input to output. Neither the production is being made for a particular customer. Lot of low cost items are getting produced, which scenario is very much suitable for process costing. Here are the examples. We have already discussed some of them. So refinery, steel, paper mills and readymade garments. In garment making particularly, you see that both process and job is possible. For readymade garment, process costing is a right scenario. In which case in garment making you have a job costing? Can you think of? So you go to shop or mall, they have produced n number of shirts, let us say. Whatever you like, you pick up. As against this, you buy clothes, go to tailor, get the shirt made as per your requirement. Both is possible, which is more appropriate in process costing and which is more appropriate in job costing. Obviously readymade garments is through process costing and a tailor made garment is through job costing. Now, I think the difference is clear to you. So in tailor made case, it is known that from this cloth, this particular shirt is being produced. It is being produced as per specification of one customer, specifically identifiable. Can you identify it in case of a paper? Is this paper being specially made for me? No, paper is being made on large scale. I have some choices available. I can choose the paper which is more suitable to me and I buy. But it is not being made specially for my requirements. Of course, in case of security printing or currency printing, it is different. But generally, in a paper mill, different types of papers are being made as per the manufacturer specifications. So, for refining, steel, paper mills, I had also given you example of plastic, cement. Almost all large scale manufacturing is being done mainly through process costing. Now, let us look at job costing. Now, in job costing, what happens? These are large, unique, high cost items. They are mainly built to order. They are not being mass produced and here, there is one to one correlation between input to output. So, many of the cost can be directly traced to a particular job. Now, can you give me examples of job costing? Just think of the examples. One is of course, I have told you, in case of garment, what will be the example of job costing? Will ready made garment be the example for job costing? No, because that is being mass produced, whereas a tailor made garment is a specific example of a job costing. Like that, any other examples can you think of? No very job costing done apart from tailor made garments. If you go to a doctor, you are not well. The advice he or she gives to you, is it mass produced or customized? Definitely it is customized. So, a professional service is essentially being given to one customer. Medicines recommended may be mass produced. They are not produced only for you. Doctor may prescribe some standard medicines, which are mass produced in a factory. But which medicine to take and in what doses etcetera, that professional service is essentially in the nature of job costing, because it is a customized, built to a specific person. Like that, any other examples, you have what is known as designer costumes, which are specifically made for one customer. Of course, they are very costly, but that is an example of a job costing. Any other case, construction industry will fall in which one? This is a very good example of job costing. So, if a dam or a bridge or even a building is getting constructed, it is unique in nature. It is not like mass produced soaps or mass produced steel. Steel may be going into construction of a say flyover, but flyover is being built for a particular location. That is why it is an example of job costing. So, these are the features. Now, job costing itself can be divided into two types. One is job manufacturing, other is batch manufacturing. In job manufacturing, the manufacturing happens just one at a time or a very small volume. In batch manufacturing, it is in a relatively small quantities, but it is not just one batch. Some multiple, some group of products are being produced. These are the examples of typical job costing applications. So, you have a special order printing, building construction, designer costumes, tailor made garments or we also talked about professional services like customized software, repairing, doctors, lawyers, chartered accountants. They are all in the nature of job costing. Can you give some examples of job manufacturing and batch manufacturing? Both are within overall domain of job costing, but there is a slight difference. So, can you think of the two? Say, you want to get some furniture for your office. What method of costing will be suitable in your office or let us say you are in a college. So, college wants benches in the classroom. So, which method will be used for the supplier will use which method for this type of supplier benches in a classroom. Actually different possibilities exist. One is process costing. So, you go to a carpentry shop, they may have certain models of benches ready and just pick up the model and order them like a readymade garment. So, that will be an example of process costing. It is not being produced to that classroom, but they may have different varieties. Just pick up the suitable variety and order say 20 benches for that classroom. That is one. Second, it could be batch manufacturing. So, you want specific type of benches. You give a specific order for 20 benches. So, instead of making one bench, they are making 20 or 50. So, similar products, but not as large as in process costing. They are still being made for the customer, order built only, but slightly bigger lot than job costing. And job costing scenario follows where you just want one or two pieces. So, if you only want let us say some furniture suitable for your living room or in your house, perhaps you may hire some interior decorator and as per your specifications, carpenter makes the furniture. It becomes a case of job manufacturing. Are you getting? So, these are the various methods. Now, this is one case where in non-manufacturing scenarios, the job costing is used for making up cases, program, contracts, missions, they are customized. So, you have to use job costing. Now, before going for further part, what is the advantage or disadvantage of job and process costing? Can you think of the advantage? In process costing what happens, it is a mass produced. So, relatively the cost comes down. It is not for one customer. Secondly, the costing becomes easy because there is no one to one link. You just account for the inputs, then you get the total cost. You can divide by the outputs to get the cost per unit of the output in process costing. We are going to see it. In job costing, what happens is you have one particular job, which is different from other jobs. So, the inputs is going to that particular job have to be separately accounted. Take total of all those inputs, you will know the job cost. But you will have to do it 1000 times if you have done 1000 jobs. In process costing, what happens is even if you produce 1000 units which are identical, you just take the total cost divided by 1000, you get the cost per unit. So, we will now look first at the job costing. Now, job costing as we have discussed, every job is identifiable separate and unique. So, we have to calculate and record the inputs for each job and report them. Usually this reporting is done in a cost sheet format. So, for one job or for one contract, a cost sheet is produced, all the costs are identified or a portion, they are added, you get the cost sheet. So, cost sheet can be prepared for a job. Sometimes it is prepared for a particular department or a subunit for a particular period. Both is possible. Here is a format of cost sheet. So, now you know these items like direct material, direct labor and direct expenses. So, in cost sheet, we try to calculate, you have a particular job in mind or you may have some month for which you are accounting for the cost. So, the first cost is direct material. Direct material cost is mainly the raw material. So, you take opening cost, add purchases minus the closing stock of the raw material. That becomes the raw material consumed in that period, that is a direct material cost plus direct labor plus direct expenses. The total is known as prime cost. This is called as prime cost, because you are able to identify those costs to that particular job. So, that is the first cost. Next, what will be the cost involved for a job after prime cost? What are the other costs other than the direct cost? Just now we have discussed them, that is indirect cost or they are known as overheads. So, based on some estimates, those overheads will be charged, because they cannot be directly linked, but you will calculate say 75 percent of direct labor cost as it was done in the last case or say 2 rupees per machine hour. Using some basis, the overhead costs are also charged to job. So, now after prime cost, first factory overheads are charged. So, you get the total which is known as works cost. In this works cost, opening and closing work in progress is added and reduced, because there could be semi finished goods in the factory. So, works cost add opening less closing stock of work in progress, you get the factory cost. To the factory cost, we add office and admin expenses, which gives us cost of production. At the level of cost of production, the finished goods stock is valued. So, you can add opening stock of finished goods minus closing stock of finished goods, you get cost of goods sold. I hope all these terms are getting clear to you. I will just go back. So, we started from prime cost, you know that you classify direct and indirect costs. So, direct costs are totally known as prime cost. Then indirect cost or the overheads are classified usually as for function. So, you have factory, admin, selling expenses, etcetera. So, first add factory expenses, then adjust for work in progress, which will give you what is known as factory cost. Then add office overheads, which gives cost of production, then adjust for opening and closing finished goods. So, you get cost of goods sold. To this, we need to add selling and distribution expenses. So, we get what is known as cost of sales. Profit is added to get the selling price or sometimes we have cost of sales. We know the sale price from the market. So, the difference is calculated as profit or loss. Of course, this profit or loss is different from the profit and loss account, which we have discussed in the financial accounting. In financial accounting, it is total for the whole company. Here, we are doing it for one product or for one division for a particular month. So, is it clear now? Usually, all the job costing is done through cost sheets. So, cost sheet is one of the very important statements used for reporting the cost. It is also used as we discussed for a department or a cost center or for a unit, for which all the costs are added to calculate the profit or loss. Now, we will go into the second type of costing that is process costing. We have discussed about job, now let us discuss about process. For accounting for process costing, we should have some idea for accounting for losses. Because many times, what happens is there are some inherent losses in the production processes. Then they are required to be classified and properly treated. Before going for a further discussion, can you think of such inherent losses? Can you give some examples? Like certain materials or certain processes, there is some loss which always happens. In a production, can you give some examples? Can you give some examples of processes which involve inherent losses? One immediately coming to mind, my mind is petroleum products. You know that petroleum products are typically evaporative. So, if you are doing anything with petrol, diesel or such products, 1 or 2 percent of it may just evaporate. So, that is one normal loss. Or in machining processes, say you are operating on a lathe. Some part of the material will be lost or even a more simple example. Let us see you are doing, a tailor is making clothes that is garments from the cloth. You cannot use the whole of it. In the cutting process, some cloth will be lost. So, in every process almost, there will be some losses. Now, how to treat those losses? Becomes very important because it is necessary for the costing system to decide whether these losses can be charged to the customer or they have to be born by the company. So, the losses are classified into two types, normal and abnormal. In case of normal losses, what happens is they are inherent to the process. So, very nature of operations require that there will be some loss. They can be reasonably estimated through experience and through technical data. And such losses can be charged to the customer. As against this, there are abnormal losses which happen because of uncertain reasons. So, actual loss when exceeds the normal, it is due to abnormal losses. Every workers are careless, there is a wrong design which causes more loss than what should have been normal loss. So, can you charge the customer with abnormal loss? Naturally, you cannot. It is because of company's carelessness, you cannot blame the customer. So, abnormal losses has to be born by the company. Normal losses gets charged to the customer. So, for example, you go to the tailor, you are charged for the whole cloth. There will be some cutting in the tailoring process. Naturally, the customer has to bear. But if the whole cloth is destroyed because of carelessness of the tailor, then tailor will have to compensate the customer because that loss is abnormal. Similarly, in petroleum products, let us say there is a 3 percent loss. That is normal. But if there is some fire, then it is because of carelessness. That has to be born by the company. You cannot tell the customer that there was a fire, so we will not deliver you. So, abnormal and normal losses have to be classified and then accordingly treated. Now, in process costing, we will go for a recording part. We have just now seen that a cost sheet is typically prepared in a job costing scenario. In process costing, instead of cost sheet, usually the process accounts are prepared. Now, what is the difference? In a cost sheet, it may be for a job. In processes, there is nothing like one identifiable job. Accounting has to be for a particular period. Let us say you are making steel. You are not making 1 kg or even 1 ton of steel. You are making hundreds of tons in a common process. So, essentially you calculate the cost for a week or a month and divide it by number of tons made to get the cost per ton. Are you getting me? So, reporting is of the process account. I will give you one more example. In a soap manufacturing, can you make one piece of soap? That is one small cake of soap. No. You will calculate the cost for the month and you will divide it by the number of soap cakes produced so that you get the cost per cake. So, reporting of cost happens through process accounts. In each process account, typically these costs are charged. Same like in job costing. You have direct material, direct labor, direct expenses, some production overheads. Only difference is here it is period wise. In job costing, many times it is job wise. Now, let us take one case to make it more clear to you. Now, these are the costs for the three processes. You have process 1, process 2, process 3. The direct costs, they are directly allocated so they have been estimated. That is material, labor and expenses. Now, factory overheads are 4000 and they are to be charged on the proportion of wages. 15000 units were put in in the first process and then it goes on. This is the output and the normal loss estimated for the processes. So, for process 1, 3 percent, process 2, 6 percent, process 3, 2 percent, these are the normal losses by technical estimate. But the actual output is given as 14, 550, 13, 500 and 13, 300. You are required to make process accounts. I will go back. Just think over, how will you get the cost per kg or per unit because 15000 units have been produced, processed, put in for the processing. Then at the end of process 1, you got 14, 500. At the end of process 2, you got 13, 500. At the end of process 3, you got 13, 300, which is your final output. Naturally, you want to know what is the cost per unit. Now, how to calculate? Can you think of? How will you get cost per unit? Each unit is not identifiable. So, no purpose of making separate cost sheets for 1300, 13300 units, you will have to make 13300 cost sheets in job costing, which you would not need now. You will just make few accounts. So, how will you get the cost? Can you think of? One very, very simplistic way is simply add all the costs, add all material, wages, expenses plus overheads and divide it by 13300. You will get some cost per unit. It can be done, but it does not give you real proper analysis, because we want to know the cost of process 1, process 2 and process 3 separately. You want to control the cost for each process. You may also want to take a decision of outsourcing sometimes. So, we want to know precisely the cost for every process and then the final cost. That is why typically, process accounts are produced. So, can you think how the process accounts will be produced? So, we will make 3 process accounts. We will make one for process 1, then for process 2 and then for process 3 and then the relevant cost for each process will be accounted for. Is it clear? Now, let us see the accounts as they might be prepared. So, in process 1 account, as you know, material cost was 70, wage cost was 38 and other expenses were 11. They were already identified and they have been charged to process 1 account. Is it clear to you? If you want, I will just go back. From here, this costs were picked. Please concentrate on process 1 right now, 70, 38 and 11. So, they have been charged first, material, wages and other expenses. Now, let us go to factory overheads. For factory overheads, it was given that they should be charged on the basis of wages. Now, the wage cost as you can see is 38, 40 and 25. Now, proportionate basis, the factory overheads have been charged to process 1 at 14,757. Let us see, you can do the calculation that is done. So, you have got material, wages, other expenses and factory overheads giving you a total cost of 13,757. If you look at units, there was an input of 15,000 units which was given to you in this slide. Now, what is the cost per unit? Look at the output and the normal loss. The normal loss is 3 percent and the output is 14,550. So, what we have done is, first we have calculated the normal loss at 3 percent, 3 percent of 15,000. So, 450 cost, how much is the cost of normal loss? Right now, 0 because we have to charge this cost to the customer, nothing will come on the credit side of the account. We will not get anything from normal loss. So, in the cost column, we will write 0, transfer to process 2, I am sorry it should have been process 2. Now, this says process 1, actually it should be process 2. From process 1, the items are going to process 2. So, transfer to process 2 comes to 14,550 which was given over here. That is the output. So, entire cost of 13,757 has to be charged to units 14,550. So, 13,757 upon 14,550 will be the rate per unit at the end of process 1. Is it clear to you now, whole process account? In this case, there was how much was an abnormal loss? 0 because 3 percent means 450 and 15,000 minus 450 exact output is 14,550. So, there was no abnormal loss. In process 2, there could be abnormal loss. Look at the figure for process 2. In process 2, the input is 14,550, the output is 13,500 and the estimated loss is 6 percent. Now, let us look at process 2 account. Now, on the side of cost, first for 14,550, we have charged 13,757 which comes from process 1, no problem. Then, material, wages, other expenses are just charged. You know these figures were ready and we have just charged it, 15,000, 14,000, 40,000 and 12,000. So, no issues. The rates have been also proportionated. Look at the other side. Now, the normal loss is taken at 6 percent. Then we have to calculate the abnormal loss which comes to 177 because the units transferred are 13,500. The balance becomes the abnormal loss. So, the total cost of the process which you can see here is 216291 has been proportionately charged as abnormal loss and as transferred to process 3. So, we will stop here because time is up. Next time again we will look at process 1, 2 and 3. To do a very brief recap, we have seen that two major methods, job costing, process costing. In job costing, it is identifiable, relatively small quantum of output made for a specifically for a customer, we make a cost sheet for the same. In process costing, it is a mass production. The output is for inventory not for a customer and we make process accounts for it so that we make cost per unit. In the next session, we will discuss more about it. Thank you so much.