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3,000 units of material are input to a process. Process costs are as follows.
Material $11,700
Conversion costs $6,300
Output is 2,000 units. Normal loss is 20% of input.
The units of loss could be sold for $1 each. Prepare appropriate accounts.Step 1 Determine output and losses
Input 3,000 units
Normal loss (20% of 3,000) 600 units
Expected output 2,400 units
Actual output 2,000 units
Abnormal loss 400 unitsStep 2 Calculate cost per unit of output and losses
Scrap value of normal loss 600
Scrap value of abnormal loss 400
Total scrap (1,000 units x $1) 1,000
Cost per expected unit = ((11700-600) + 6300) / 2400 = 7.25My question is why it was not ((11700-1000) + 6300) / 2400 = 7.08??
We only less scrap value of Normal Loss…
Why didn’t we less the scrap value of abnormal loss as well, from the material cost?The unit cost is calculated on what is expected – i.e. taking account only of the normal/expected loss.
This is al explained, with examples, in my free lectures on process costing. The lectures are a complete course for Paper MA (F2) and cover everything needed to be able to pass the exam well.
A process has a normal loss of 10% of material input.last month 3000 kg of material were input and there was an abnormal loss of 125kg .what was the output of good production last month?
a 2700
b 2875
c 2825
d 2575There is no point in simply typing out a full question and expecting to be provided with a full answer. You must have the answer in the same book in which you found the question and so ask about what it is you do not understand in the answer and then I will explain.
It would seem that you are not watching my free lectures, because this is all explained in my lectures!
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