process costing

The total loss is 50kg, of which 20kg is the normal loss and 30kg is the abnormal loss. For materials, we spread the cost over the expected output (actual output + abnormal loss) of 180kg. So the material cost per kg is $800/180 = $4.44 The approach is the same for labour and overheads, except that the abnormal loss will only have had half of the labour and overhead work. So we spread the total of $2,500 over 165kg (150 + 30/2). So the cost per kg is $2,500/165 = $15.15 So the total cost per kg is 4.44 + 15.15 = $19.59

It isn't!! The expected output is the input less the normal loss, which is the same as the actual output plus the abnormal loss as I wrote before.

We only spread the costs over the expected output (actual output + abnormal loss). Abnormal losses are costed at full cost per unit just as though they were finished goods. Have you not watched my free lectures on process costing? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.

"The approach is the same for labour and overheads, except that the abnormal loss will only have had half of the labour and overhead work. So we spread the total of $2,500 over 165kg (150 + 30/2). " It is said that losses are identified when the process is 50% complete. Here the output is already 150kg meaning 150kg/200kg = 75% complete. All losses should have already been identified. Why do we need to half the abnormal loss ?

I'm sorry. Here the process is fully completed since there is no CWIP. Losses should have already been identified. So, why do we need to half the abnormal loss?

Because all losses (including the abnormal loss) are identified when the process is 50% complete. So the abnormal losses will only have had 50% of the work - they are not going to have any more work done on them once they ate identified as being losses :-)

Thank you so much for your reply. I'm trying to understand the process account for it: On the debit side: Materials $800 Labour $1500 Overheads $1000 Total 3300 On the credit side: Normal loss 0 Output 150kg *19.59 = $2938.5 Abnormal loss $361.5 (balancing figure) Total = 3300 The abnormal loss value should be the balancing figure 361.5. Analysing the figure: 30*4.44 + 15*15.15. Am I correctly understanding?

Yes, that is correct (although appreciate that you cannot be asked to actually write up the process account in the exam).