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Hello Sir.. could u Plz help me with this question:
A company expect a normal loss of 10% of input in a process. Information are as follows:
Material input 400 litres Costing $8 à litre.
Conversion cost $4800.
Output 330 litres
Losses identified when process is 60% complete.
What is value of completed output?To get the cost per unit, you divide the total cost by the expected production.
The normal loss is 40; and so the abnormal loss is 30 units.So for materials the cost per units is (400 x $8) / (330 + 30) = $8.89 per unit
For conversion costs, because the losses are identified when 60% complete, the money is spent effectively producing 330 + (60% x 30) = 348 units.
So the cost per unit is 4800 / 348 = $13.79 per unit.
So the total cost per unit is 8.89 + 13.79 = $22.68.
Sir I can’t understand how you got abnormal Loss of 30 units. Kindly explain Sir.
The actual loss is 400 – 330 = 70 units.
The normal loss is 10% x 400 = 40 units.
So the abnormal loss is 70 – 40 = 30 units.
Hope that helps.
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