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During the month of December, a manufacturing process incurs material cost of $8,000 and conversion costs of $4,500. 2000kgs of material was input. There is a normal loss of 10% and all losses have a scrap value of $1.75 per kg. During the period, 1700kgs were otput yo finished goods
Opening and closing inventories in the process were nil.What were the value of the abnormal losses written off in the statement of profit or loss?
My answer
Avg cost/unit= (8000+4500-350)/(2000-200)
=$6.75/unit=100*6.75=$675
Book answer=$500
sir how is my answer wrong
Because the idea behind valuing abnormal losses is based on the value at avg cost/unit ryt?The unit cost is calculated based on the expected output (i.e. the input less any expected/normal loss).
The abnormal losses are then costed at the full cost per unit.
This is all explained, with examples, in my free lectures.
Please watch the lectures – you cannot expect me to type them out here 🙂
Alright sir I will definitely watch the cost accounting method video also
Thank you SirI suggest that you watch all of the lectures in the order of the chapters in the free lecture notes (which you need in front of you when you watch the lectures).
The reason is that many lectures depend on knowledge from earlier lectures – just as is the case if you attended a classroom course.
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