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HI My Dear Tutor, I have a question .
Materials(1000)—–12000
Labor-7000
overheads-8000
normal loss 10%
actual outputMy question here is that, if normal loss value has not been given is this possible to find it by calculating in the following way,12000$/1000=12
No it is not possible.
If no scrap value is given then you assume that the value is zero (as in the first example in my free lectures on this).
(The lectures are a complete free course for Paper F2 and cover everything needed to be able to pass the exam well)
From Colin Drury,
A department with no opening work in progress introduced 1000 units into the process ; 600 are completed, 250 are 20% complete, and 150 units are lost, consisting of 100 units of normal loss and 50 units of abnormal Lisa. Losses are detected upon completion. Material costs are £8000 (all introduced at the start of the process) and conversion costs are £4000.
My question now, normal loss value was calculated the same way as normal output. I thought that if no scrap value is given, normal loss has no value.
Could it be because of the statement ‘Losses are detected upon completion’?Values from the book :
Work in progress =2250
Completed units =7800
Abnormal loss =650
Normal loss =1300Assuming the you copied the whole of the question correctly, then the answer is wrong.
Normal losses are always valued at their scrap value – regardless of what costs were incurred in making them and regardless of the state of completion.
if there is no scrap value, then the value of the normal loss is zero. Only abnormal losses are valued the same way as normal output.
What is in my lectures is correct and is what is expected from you in the exam.
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