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Hi sir..
The question is thisA product is manufactured in two processes. Details for the second process in period 4 were as follows:
Opening work-in-progress: Nil
Materials transferred from the first process: 4,000 litres
Output transferred to finished goods: 2,900 litres
Closing work-in-progress: 800 litresNormal loss is 5% of input. Losses have no scrap value.
Closing work-in-progress is 100% complete for material and 60% complete for labour and overheads.The cost per unit equivalent has been calculated at $3.32 per litre for materials and $2.20 per litre for labour and overheads.
The equivalent units of output for labour and overheads for the period were :
A 2,900 litres
B 3,440 litres
C 3,480 litres
D 3,800 litresI worked it out and got the answer as 3380 litres…but the answer is 3480 litres..worked out like (2900+100+60%800) but i don’t understand why the abnormal loss of $100 is added..please help..
ThanksWe always cost out based on the expected losses (not what was actually lost).
Any abnormal losses (or gains) are then costed at the full cost per unit.You need to watch the free lectures to see the whole picture.
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