CAF-5 · Chapter 17 · Question 6 of 20
(Process Costing & Abnormal Loss) In Process 1, 5,000 kg of materials were input at a total cost of Rs. 50,000. Conversion costs incurred were Rs. 30,000. The normal loss is strictly estimated at 10% of the input, and the scrap value of the loss is Rs. 5 per kg. At the end of the period, the actual good output was exactly 4,400 kg. What is the value of the abnormal loss to be charged to the costing P&L?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 1,722
Explanation
Normal loss = 10% of 5,000 = 500 kg. Expected output = 4,500 kg. Total Cost = 50k (Mat) + 30k (Conv) = Rs. 80,000. Scrap of normal loss = 500 * 5 = Rs. 2,500. Net Cost = 80,000 - 2,500 = Rs. 77,500. Cost per Equivalent Unit = 77,500 / 4,500 expected units = Rs. 17.222/kg. Actual output is 4,400, meaning Abnormal Loss is 100 kg. Value = 100 kg * 17.222 = Rs. 1,722.
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