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Normal loss in process accounts

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Normal loss in process accounts

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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  • November 15, 2015 at 4:00 pm #282577
    sm8980
    Participant
    • Topics: 48
    • Replies: 38
    • ☆☆

    Hi,

    Please could you help me in understanding part of the answer to this question:

    ABC manufactures product x in a single process. Normal loss (scrap) in the process is 10% of output and scrapped units can be sold off for $4/unit.

    In period 8, no opening/closing inventory. Total process costs $184800. Input in the month 13200 units.

    What was the cost/unit produced?

    I do not understand the part where the normal loss is working out. In the answers it has worked it out to be:

    13200 x 10/110

    why 110? I understand loss is at 10% but am really confused as to why its been calculated that way.

    Expected output is then 12000. I understand the rest of the working to get the cost/unit however the above is puzzling.

    Many thanks for your help and again for this service! Great job 🙂

    November 15, 2015 at 6:01 pm #282605
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51551
    • ☆☆☆☆☆

    The normal loss is 10% of output.

    Therefore for every 100 units output, the loss must have been 10, which means that the input must have been 110.
    (Input 110, lose 10, so output = 110 – 10 = 100)

    So since the input is 13,200, the loss (at 10 units for every 110 input) must be 10/110 x 13,200.

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