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Hi, sir. I had doubt with abnorml gains in process costing.
I can solve the process costing questions but i am unable to understand why the cash is reduced in scrap account when we have abnormal gains. Certainly, if we wish to balance the both side abnormal gain is to be presented on credit side along with cash which reduces cash amount. But first if we consider the normal loss situation where normal loss if like usd 480 ( scrap valie) and then we consider abnormal gain situation wgere normal loss ks 480 and abnormal gain is 240 ( scrap value) .Its hard to tell say but in nutshell i want to know why abnormal gain reduces cash received foe scrap sale in scrap account. It is a gain!
When calculating the cost per unit we take into account the normal loss and the cash expected to be received from the normal loss.
If there is an abnormal gain then we benefit from the extra units but we lose some of the scrap that we were expecting to receive.
I do explain this in my free lectures on process costing. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
A product goes through two processes. Last month’s data for process two was as follows:
Normal loss is 5% of input. All losses are fully processed and have a scrap value of $3 a litre. Closing work in progress is fully complete for material but is only 20% processed.Information ,
Material transferred from process one 3,200 litres at $5 a litre
Conversion costs 8,500
Output transferred to finished goods 2,800 litres
Closing work in progress 100 litres7 What is the value of the completed output? $
8 What is the value of the closing work in progress (to the nearest cent)? $Hello sir ,can you help me to solve is problem please
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