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process costing

Forums › FIA Forums › MA2 Managing Costs and Finance Forums › process costing

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by Kim Smith.
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  • April 26, 2018 at 4:42 pm #448983
    amirrhamza786
    Member
    • Topics: 9
    • Replies: 0
    • ☆

    the following information relates to a company polishing process for the previous period
    output to finished goods 5408 units valued at $29744
    normal loss 276 units
    actual loss 112 units

    all losses have a scrap value of $2.50 per unit and there was no opening or closing work in progress

    the value of the input during the period was?

    April 27, 2018 at 7:55 am #449047
    Kim Smith
    Keymaster
    • Topics: 134
    • Replies: 8304
    • ☆☆☆☆☆

    The polishing cost of a unit of output is $29,744/5,408 = $5.50
    This is also the cost per unit of any abnormal loss (because it was supposed to be good output) and abnormal gain. The abnormal gain is 164 units (276 – 112)
    Input (units) = Actual output + Actual loss = 5,408 + 112 = 5,520
    Input = Actual output + Normal loss – Abnormal gain = 5,408 + 276 – 164
    Putting values to these, input = 29,744 + (276 x 2.50) – (164 x 5.50) = 29,532
    Another way of looking at is considering:
    Cost per unit ($5.50) = [Total cost incurred (x) – expected scrap (276 x $2.50)]/Expected good output
    Expected good output was only 5244 (i.e. 5408 – 164 )
    Rearranging, x = (5,244 x 5.5) + (276 x 2.5) = 28,842 + 690 = 29,532

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