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Good day Sir John can you clarify this for me…
I know Abnormal loss and gain is valued at good units of output
for example,
Input cost – Normal loss (valued at scrap)/ Input – Normal loss = cost per unit .
I saw a question in the bpp kit where they less the scrap value cost per unit from the cost per unit when crediting the abnormal gain to statement of profit and loss.
My confusion is the part where they less the scrap value from the cost per unit . It’s like they lessing it twice
BPP kit Process costing page 77 question 9.17
I do explain this in my free lectures on process costing!
The are not ‘lessing it’ twice. It is because if there is an abnormal gain they are not receiving some of the scrap proceeds that they had been expecting to receive and that they had taken into account in the costings.
Input material 10,000kg at cost of $100,000
Conversion cost $50,000Normal loss 12% of material input.
Losses are sold at value of $5
Output 9200kgWhat is the abnormal gain value that is credited to statement of profit and loss?
Bpp book answer
$100,000 + $500,000 – $6000/ 10,000 x 88% = 16.36
Abnormal gain cost
16.36 – 5 = 11.36
11.36 x 400kg = $4,545
Sir I don’t understand why they less $5 from $16.36.. They had already adjusted the cost per unit with normal loss value..why less $5 again
Please clarity that for me
Thank you.
I have explained the reason in my previous reply.
Have you watched my free lectures explaining this?
I really cannot add to what I replied before and what I explain in the example that I work through in the lecture.
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