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ACCA MA · Guided practice (Show me how)

Chapter 12: Process Costing – Losses

Process losses: normal loss, scrap value and abnormal loss

Normal loss is the loss expected from a process, based on past experience. The process costs, less the scrap proceeds of the normal loss, are spread over the number of units the process was expected to produce. Any loss beyond the normal loss is an abnormal loss and is charged separately at the full cost per unit.

During May the following costs were incurred in a process: materials (1,000 kg) $9,000, labour $18,000, overheads $13,500.

A normal loss of 10% of input was expected. Actual output was 850 kg. Losses are sold as scrap for $9 per kg.

  1. (a) The cost per kg

    Calculate the cost per kg for May.

  2. (b) The process account and the loss account

    Show the credit side of the process account for May, and prepare the loss account for May.

Opening this exercise…