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A company produces a single product from one of its manufacturing processes. The following information of process inputs, outputs and work in process relates to the most recently completed period.
Kg
Opening work in process 21,700
Materials input 105,600
Output completed 87,100
Closing work in process 28,200The closing work in process is complete as to materials and 50% complete as to conversion costs.
The opening work in process included raw material costs of $56,420 and conversion costs of $30,405. Costs incurred during the period were as follows.
Materials input $291,572
Conversion costs $226,195Normal loss is 10 per cent of input. All losses are completely processed and have a scrap value of $2 per kg.
it appears that the abnormal loss here is 1440. But my calculation was different in this case don’t get it why and how they get that figure.
my working:
105,600*10%= 10,560=Normal loss
So 105,600-10,560=95,040= Expected output
87,100= Actual output
So, in this case Expected output-actual output= abnormal loss = 95,040-87,100= 7,940
can you explain why abnormal loss is in this case 1,440 and not 7,940? What am I missing here?
thanks in advance
I don’t know where you found this question but strictly it should not be asked in the exam because the examiner has said that he will not ask WIP and losses in the same question.
However, the input was 105,600 and therefore there is a normal loss of 10% x 105,600 = 10,560.
The actual loss was 21,700 + 105,600 – 87,100 – 28,200 = 12,000.
Therefore the abnormal loss is 12,000 – 10,560 = 1,440.
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