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Sir i will be sitting for fma exam by 27th october, before that i want to clear all the questions, please don’t mind if I repeatedly ask the same thing just so i clear any confusion i have.
Sir there are some process costing questions, please help me out with them.
1) if in a question it’s not specified about the degree of completion about materials, but if it says losses are identified when process is 50% complete, are we always going to refer it labour and overhead is half complete? And material as 100%?
2nd) sir are realisable, scrap value, losses can be sold for are the same thing? And for disposal cost how is it going to be specified ,like scrap value has different terms, is it same for disposal as well?
3rd) sir i am confused between transferred units and completed units, how are we going to know if it’s completed, like during fifo method we add opening units and deduct closing to find output and deduct it from output to find completed output, but if in a question it already says output what does it means? That it has opening units added? And are we going to deduct closing units? If in weighted average method since we know opening units are carried to full cost, but if the question mentions opening units as well as transferred units and closing, what are we going to do? Transferred units are completed output? Or we have to deduct closing inventory from them because in weighted we don’t exclude opening? A bit confused here
And if it says work started and finished means it’s already deducted opening from them sir?
4th sir theres a question and it uses weighted avg method, but in that we got output units and it says opening inv 100% complete for materials while 70% complete for conversion costs and we have to find equiv units for conv costs, we are not going to find those 70% for open inv right sir? Because it’s weighted so it must be added to full in output units, just closing inventory is going to be figured out?
Also sir we know normal loss has no/zero value until question mentions its scrap value, but in a question it just says normal loss 5% of input valued at $3 per unit, it doesn’t says specifically that $3 is scrap value or what, and we still deduct it from materials, could you explain me this
Last question sir
There’s a question where it says losses can be sold for 5$ per kg and normal loss is 12% of input which I’m confused about when it says losses can be sold is that scrap value? But we got normal loss after finding the normal loss units we deduct the value from input units to get cost per unit, question asks what is the credit to Statement of profit and loss from the abnormal gain account and i solved it in this way first calculating the abnormal gain value from the cost per unit, after that i separately calculated the revenue being generated from abnormal gain $5 and as it’s said assuming it as scrap value its set off against the abnormal gain/loss so i deducted it from abnormal gain, while in the book answer deducts the $5 with cost per unit and then multiplies it with abnormal gain units, could you please tell me the way i solved it is correct too?
1. Yes
2. I don’t understand what you are asking. The scrap value is what losses can be sold for (all losses). You obviously cannot be asked to write up a disposal account in the exam, but I do explain it in my lectures.
3. Output is what leaves the process as being finished and will include the opening WIP that has been finished. For the rest of your question it seems that you are asking me to repeat what I explain in my lectures, and I do not have the time to do that 🙂
4. For the first bit, see 3.
As regards a question saying that the normal loss is valued at $3 then it can only mean that the scrap value is $3,5. I explain this in my lectures. I deal with an abnormal gain and I explain why it is what it is.
Sir for 2nd question I couldn’t differentiate between ” losses can be sold for” and realisable value but i got it it’s the same thing, and about disposal cost i wanted to know if it would be provided in the same way like it mentions about scrap value in question? Or are there any other names for disposal cost as well?
And 3rd question sir I’ve watched your lectures I wouldn’t ask you to repeat all of it i have no intention of that, I couldn’t perceive transferred units, completed output and started and finished units, so just I don’t make any mistakes i asked about it.
And last question as well sir i have solved it and got the same answer but I didn’t know if I’m doing it the correct way, because according to the statement for abnormal losses their net cost is the cost per unit of making them deduct by revenue earned from selling them, so when i calculated cost per unit by deducting normal loss scrap from inputs, instead of deducting scrap value per unit from cost per unit, i simply calculated abnormal loss value by cost per unit just like we calculate good production value and separately scrap value of abnormal loss, and deducted them both and got the same answer
Thankyou for explaining the rest questions sir!
Losses can be sold for, disposal value, sale proceeds all mean the same thing. I can’t think of any other alternative words 🙂
The way you have done it is fine. (and all that matters is that you get the correct answer – nobody looks at your workings, and so how you did it does not matter)
Yes exactly sir, but in book it has mentioned for scrap value which is credited to process account but for disposal value its added to process account, this is what is confusing me, if disposal is the scrap value then why in book it adds please could you explain me this
I have no idea what your book has done because I do not know what book you are using.
What I do in my lectures is correct and if you got the correct answer then I do not know what you are worrying about – nobody looks at your workings in the exam and it is irrelevant how you arrive at the answer.
Yes sir you’re right about workings, I’m worried about how am i going to differentiate if the cost is supposed to be deducted or added, because i know scrap value has to be deducted but for disposal cost It’s 4.1 page 292 chapter process costing in Acca approved bpp text sept 2019-aug 2020
Even in the accounts, in process account disposal cost of normal loss is added, while we know scrap value of normal loss is credited which is deducted from materials, but if it’s disposal cost instead of scrap it’s going to be added with material as it says and in abnormal loss/gain account as we know scrap value is charged against the loss in their accounts, while disposal cost of either abnormal loss or gain it will be added and therefore transfer of the cost to statement of profit and loss, if i could share picture i would share that particular book page:( where it’s highlighted about disposal cost, it tells us about losses with scrap value as well as losses with disposal cost
Anyways sir thankyou for taking out time to respond to my every query, i really appreciate it! I need your best wishes as soon I’ll be sitting for my exam 27th of october
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