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Dear Mr John,
Edgarise Co uses process costing to value output.During the last month the following information was record:
Output : 2800kg -$7.50/kg
Normal loss : 300kg , scrap value of $3/kg
Actual loss : 200kgWhat was the value of the input? My answer is $21,150 ?
Input costs to a process amount to $120,000. It is expected that 1,000 units of good output will be produced and that normal losses will be 200units.
In fact, only 900 units of good output were produced. All losses, whether normal or abnormal can be sold for $5/unit.
What is the cost per unit of good output and what is its inventory value?This is what I did:
Expect units 1000 Total Cost 120,000.00
Normal loss (200) Scrap Value (1,000.00)
800 119,000.00
Cost Per unit = 119,000/800. = 148.75
Actual Output value is = 900* 148.75 = 133,875
Abnormal Gain:
100 Units * 148.75 = 14,875.00
Scrap Value :
100 Units * 5 = (500.00)
14,375.00No 🙂
We expect to produce 1000 good units and there to be a normal loss of 200.
That must mean that the input is 1,200 units.
The scrap for the normal loss is 200 x $5 = 1,000.
So the cost per unit is (12,000 – 1000) / 1,000 = $11
We actually had 900 units produced and so the value is 900 x $11 = $9,900
(Although the question did not ask for it (so do not waste time), the actual loss was 1200 (input) – 900 (output) = 300 units. We expected a normal loss of 200 units, so there is an abnormal loss of 100 units.)
Hi John
Thanks for this but thats not one of the answer options.
The options are as follows:
A B C D
Cost per unit 131.67 132.22 119 100
Inventory value 118,500 118,000 107,100 90,000
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