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ABC manufactures product X in a single process. Normal loss in the process is 10% of OUTPUT and scrapped units can be sold off for $4/unit.
In period 8 there was no opening inventory and no closing inventory. Process costs of direct materials, direct labour and production overheads totalled $184,800. Input to the process in the month was 13,200 units.
What was the cost/unit produced?
A. $12.50
B. $15.00
C. $15.15
D. $15.40I managed to get answer B which is correct but I don’t understand why I’m dividing 10/110 of input units (13,200) to get normal loss units of 1,200. Obviously calculating 10% of input units is incorrect as it clearly states it is 10% of output which we are not given. Any assistance would be greatly appreciated in understanding this as I always use trial and error when faced with such questions asking for a percentage of an unknown figure and I always somehow manage to get the answer by adding 100 to the given percentage and using it as the denominator. So for example had the question said 20% of output is normal loss I would’ve used 20/120 of 13,200 to get the normal loss figure. The rest of it (after working out normal loss units) is pretty straight forward from there for me, it’s just that little issue of the percentage calculation.
I do not have the Kaplan revision kit.
However, for every 100 units of output you would expect that 10 units would be lost, which means that you would expect 110 units to be input.
Which means (looking at it the other way round) that for every 110 units input you would expect there to be 100 units of output.
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