Question

Caleb Ltd uses a process costing system. during the month they put 640 units of total production at a cost of n$27 680. the company has estimated that the normal loss would be 5% with a scrap value of n$10 per unit. during the month 592 goods finished units were actually manufactured. the amount to be transferred to abnormal loss/gain account would be:

Answer 1

The company has given an input of 640 units & the company estimated that the normal loss would be 5%

That means Normal loss units = 640*5% = 32 units

Remianing production should be 640-32 = 608

But Actual output was 592. That means there is a loss of 608-592 = 16 units

The cost of such abnormal loss be:

Production cost = 27680

(-) Scrap value = 480

Actual Production cost = 27200 for 592 units.

So, the cost of Abnormal loss or amount transferred to abnormal loss account = 27200/592 * 16 = n$735