Process Costing

jewels.pjewels.p Font Of All KnowledgePosts: 1,774Registered
I am trying to do a Process Account. How do I calculate the amount in £'s for the Normal Loss?

Figures are Normal Loss 5%
Materials £68,000 (18,000kg)
Output 16,500kg

I have the Normal Loss as 900 kg which I believe is correct but cant get the amount in £.s right. Think I am starting to get confused now!

Struggling with this section!

Comments

  • crispycrispy Trusted Regular SouthamptonPosts: 454Registered
    Hello,

    I would think that unless the question tells you otherwise (eg. Normal Loss can be sold for £x) then the Normal Loss value will be NIL.
  • jewels.pjewels.p Font Of All Knowledge Posts: 1,774Registered
    crispy wrote: »
    Hello,

    I would think that unless the question tells you otherwise (eg. Normal Loss can be sold for £x) then the Normal Loss value will be NIL.


    Yeah discovered that after I posted this thread! Feel a bit silly now. Think my mind is numb trying to do all these abnormal and normal process accounts. Thanks anyway Crispy!

    Jewels
  • A-VicA-Vic Expertise Guaranteed Posts: 6,970Registered
    jewels.p wrote: »
    Yeah discovered that after I posted this thread! Feel a bit silly now. Think my mind is numb trying to do all these abnormal and normal process accounts. Thanks anyway Crispy!

    Jewels

    Dont feel bad jewels that is a really hard bit of the exam also make sure you separate normal loss from abnormal loss
  • jewels.pjewels.p Font Of All Knowledge Posts: 1,774Registered
    A-Vic wrote: »
    Dont feel bad jewels that is a really hard bit of the exam also make sure you separate normal loss from abnormal loss

    Not sure what you mean A-Vic when you say make sure I separate normal loss from abnormal loss?
  • A-VicA-Vic Expertise Guaranteed Posts: 6,970Registered
    jewels.p wrote: »
    Not sure what you mean A-Vic when you say make sure I separate normal loss from abnormal loss?

    Abnornal loss is when you go over your expected loss and you take the difference and scrap it i hated these questions.

    Say for intance you start with 600kg and you have a normal loss of 5% but your actual loss is 7% so then your abnormal loss would be 2%

    that 2% will also have whats called a scrap value so you account for this.

    i think thats right

    so say of 600kg @ 5% is 30 kg

    actual loss is 7% = 42 kg

    so abnormal loss would be 12 kg so say scrap value is £1 per kilo it would be £12
  • jewels.pjewels.p Font Of All Knowledge Posts: 1,774Registered
    A-Vic wrote: »
    Abnornal loss is when you go over your expected loss and you take the difference and scrap it i hated these questions.

    Say for intance you start with 600kg and you have a normal loss of 5% but your actual loss is 7% so then your abnormal loss would be 2%

    that 2% will also have whats called a scrap value so you account for this.

    i think thats right

    Yes it's so confusing. I was enjoying this Unit till I started on this. Read the same Chapter in my Osbourne Book about four times now and it is still not completely clear. Hopefully if I keep practising it will click eventually! Is this a big part in the Exam?
  • crispycrispy Trusted Regular SouthamptonPosts: 454Registered
    Hi,

    A-Vic is correct, any Abnormal Loss will have to be costed.

    In your orginal question there is an abnormal loss of 600kg

    ie:
    Output = 16,500kg
    Normal Loss = 900kg
    Abnormal Loss = 600kg

    Total = 18,000kg
  • AndypandyAndypandy Experienced Mentor Posts: 526Registered
    I think you normally get a process account question in the exam, but if I remeber correctly, June's didn't have an abnormal loss in it. Try some of the past exam questions for practice. Good luck.
  • A-VicA-Vic Expertise Guaranteed Posts: 6,970Registered
    Andypandy wrote: »
    I think you normally get a process account question in the exam, but if I remeber correctly, June's didn't have an abnormal loss in it. Try some of the past exam questions for practice. Good luck.

    it was in the december one tho because i totally messed it up then as soon as i came out i knew the answer tut at me lol
  • PGMPGM Font Of All Knowledge Posts: 1,954Registered
    A-Vic wrote: »

    so abnormal loss would be 12 kg so say scrap value is £1 per kilo it would be £12

    Would abnormal loss not be the cost of that 12kg less the £12 scrap value?
  • A-VicA-Vic Expertise Guaranteed Posts: 6,970Registered
    PGM wrote: »
    Would abnormal loss not be the cost of that 12kg less the £12 scrap value?

    yes in the process account you credit it
  • PGMPGM Font Of All Knowledge Posts: 1,954Registered
    A-Vic wrote: »
    yes in the process account you credit it

    Ah right, been a while since I did those.
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