How to find the normal loss value

GTGemini Teo8y ago

Dear Tutor I come across few question as per below: I do not know how to work on it. Q1. Output is 8000 kg, normal loss is 20%, abnormal loss is 400kg. How should I tackle such question? Q2. If selling price is $80, contribution per unit is B$18, Sales volume under marginal is Adverse (3,600) and under absorption costing is Adverse (2000). The question ask what is the standard profit per unit cost. This question I come across when doing F2 today, and got 46% of cause this two are not the reason I fail. It could be due to other question. Appreciate your help and advise. Thank in advance.

John MoffatTutor8y ago#1

1. I would assume that the question said that the normal loss was 20% of input (and therefore the expected output would have been 80% of input). Had there been no abnormal loss, then the output would have been 8,000 + 400 = 8,400. Therefore the input must have been 8,400 / 80% = 10,500. (And of these 10,500, there was a normal loss of 2,100 (20%) an abnormal loss of 400, and therefore output of 8,000) 2. Since the marginal sales volume variance is $3,600 and the contribution per unit is $18, the difference between actual and budget sales volume must be 3,600/18 = 200 units. Since the absorption sales volume variance is $2,000 and the difference in volume is 200 units, then the standard profit per unit must be 2,000/200 = $10 per unit. I do suggest that you watch my free lectures - they are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well.

GTGemini Teo8y ago#2

Thank you John for the explanation, question 1 yes, the MCQ i recall do have such answer. But for question 2. I cant recall, but your explanation do make sense. Appreciate for the detailed explanation.

John MoffatTutor8y ago#3

You are welcome :-)