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BPP 22.3
Jay Co makes a product which passes through a single refining process. The following information is available for June.Materials 15,000kg at $1.50 per kg
Labour $2,100
Normal loss 10% of input
Scrap value of loss (56c per kg)The output for the period was 13,000kg from the process. There was no opening or closing inventory during June.
What is the value credited to the process account for the normal loss and the abnormal loss for the period?
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My confusion here is that in the answer, it shows:
Cost per expected unit = ($22,500 + $2,100 + $840) / 13500 = $1.76
which is not correct, according to my calculator.Can you please help? Thanks!
To me, answer should have been
Cost per expected unit = ($22,500 + $2,100 + $840) / 13500 = $1.88444444
Normal loss: 1500kg x 0.56 = $840
Abnormal loss: 500kg x 1.88444444 = $942BPP answer is Normal loss: $840, Abnormal loss: $880.
If I did something wrong, please correct me. Thank you.
Assuming that you have copied the answer correctly, the have made a typing error and shown a ‘plus’ sign where they should have shown a ‘minus’ sign.
The cost per unit = (22500 + 2100 – 840) / 13500 = 1.76
The expected revenue from the normal loss reduces the net cost of the expected output. It doesn’t increase it.
Have you watched 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 🙂
Ah I see, yes indeed I have but I’ve come back from holiday and I seemed to have forgotten some important concept.. Appreciate your reply! Thank you.
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