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Process costing

emma123emma123 Well-KnownRegistered Posts: 108
I would be so grateful if anyone could explain to me in simple terms how to work out normal losses with no scrap sales? It should be straightforward but I can't get my head around it at all and I worked out it's only 7 weeks today until the exam! :(

Comments

  • sdvsdv Experienced Mentor Registered Posts: 585
    emma123 wrote: »
    I would be so grateful if anyone could explain to me in simple terms how to work out normal losses with no scrap sales?(

    Normal loss is EXPECTED loss of material;

    for example: Pizza Shop:

    when making dough from flour; some flour is spread on the table, that is basicaly wasted. It does not go into making the paizza base. But the cost of that wasted flour is included in the costings of the dough.

    Or Production of Jeans:

    the fabric is laid on the table and the patters are drawn on the fabric. Only the patterned part of fabric is used to manufacture the jeans but the fabric between the pattern is wasted. This waste is EXPECTED to produce the jeans.

    so Say yoy lay 1.2 square meter of Denim material costing £2 per sq meter - Material cost £2.40

    But only 0.8 sq meterial (67%) is used to make the jeans and the rest is waste (33%). off cuts etc

    However the cost of material to make one pair of jeand is still £2.40 - 100% of material paurchased.
  • emma123emma123 Well-Known Registered Posts: 108
    Thanks sdv i appreciate you taking the time to think of examples :)

    i had to do a process account so i think ive got it right now time will tell i suppose lol
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