Process Costing

Hi John,

I am a bit confused with the following question and solution:

“X uses process costing. In process 3 the normal loss is 4% of total input. Last period the input from Process 2 was 8,500 kg and additional material of 4,250 kg was added to process 3.

Actual output to finished goods was 12,700 kg”

Input = 12,750

Output:
Normal Loss = 510
Finished Goods = 12,700

Total Output = 13,210

Abnormal Gain = 13,210 – 12,750 = 460kg

I’m definitely missing something here. After watching your lecture on abnormal gains and from going through the example, we deducted the normal loss to get the total output (For example it ended up being 1,800kg after starting with 2,000kg and deducting 10% normal loss) and the actual output was 1,840kg, giving us an abnormal gain of 40kg.

However, in this question, the normal loss has been added, as opposed to being subtracted. I have looked at the question for a while and back at the notes and can’t seem to get my head around this solution.

Could you help please?