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Dear sir,
got problem while giong through these question:
1) The following data relates to a process:
Material input $8000 (for 2000 units)
conversion cost $8480
There is a normal loss of 3% of input,and all losses are sold as scrap at $16 per unit.
The actual loss in this period is 80 units.
what is the total value of the finished units? (ans:15360)In this question,actual loss is same as the abnormal loss or what??
I couldn’t get the solution sir plz help me.2) A company uses flexed budgets. The fixed budgets last month was based on 100% activity level and showed material cost of $200,000.
last months actual material costs were $120000 and showed a favourable variance of $5000 when compared with the flexed budget.
what was the actual level of activity last month as a %?3) This year, the output is 5000 units and the overhead cost is $31000.
three years ago,the output was 2000 units and the ovrhead cost was $8800.
The price index was 132 three yrs ago and is 164 this yr.
Using the high-low, what is the variable cost/unit(to nearest $0.01) expressed in current year prices?Thank you sir!!
Question 1:
The actual loss is 80 units (it says so in the question).
The normal loss is 3% x 2,000 input = 60 units.
So the abnormal loss is 20 units.The cost per unit is ($8000 + $8480 – (60 x $16)) / (2,000 – 60) = $8
The finished units are 2,000 – 80 = 1,920. So the value is 1920 x 8 = $15,360
(you will find the free lectures on process costing useful)
Question 2:
Since there was a favourable variance of 5,000, the flexed budget must have had a cost of $125,000.
Since the original budget had $200,000 for 100% activity, the actual activity must have been 125,000/200,000 x 100% = 62.5%
Question 3:
You need to restate the costs 3 years ago in current price terms.
So instead of $8,800 it is 164/132 x 8,800 = 10,933Now you can use the normal high-low technique and the variable cost is
(31,000 – 10,933) / (5,000 – 2,000) = $6.69
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