Process Query

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:30AM in AAT student discussion
Can anyone please explain how the answer is found in the ECR quiz please as i cant work out how.<BR> <BR>The quantity and cost of the inputs to a process for a given period have been entered in the following process account. There were 900 completed units of output for the period. There was a Normal Loss of 50 units and an Abnormal Loss of 50 units. All losses can be sold for £1 per unit.<BR><BR> Process Account:- <BR>Dr- input 1000 units @ £7.65 per unit, Total £7650 <BR>Cr- Finished Goods 900 units ??? <BR>Cr- Normal Losses 50 <BR>Cr- Abnormal losses 50 <BR><BR><BR><BR>Question <BR><BR>Which one of the following is the total cost of the finished output, to be entered in the process account at **, above? <BR><BR>Answer A £7,200 <BR>Answer B £7,550 <BR>Answer C £7,600 <BR>Answer D £7,650 <BR>The correct answer is: A <BR><BR><BR><BR>Question <BR><BR>Which one of the following is the correct double-entry to record the abnormal loss in the profit and loss account, assuming that there are no other abnormal losses for the period? <BR><BR>Answer A Dr profit and loss account £350; Cr abnormal loss account £350 <BR>Answer B Dr abnormal loss account £350; Cr profit and loss account £350 <BR>Answer C Dr profit and loss account £50; Cr abnormal loss account £50 <BR>Answer D Dr abnormal loss account £50; Cr profit and loss account £50 <BR>The correct answer is: A <BR><BR><BR><BR><BR>

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Process Query

    Hi<BR><BR>If your total input is 1000 units at £7.65 = £7,650 total put into the process account<BR><BR>Total output completed is 900 units<BR>Normal Loss is 50 units<BR>Abnormal Loss is 50 unit<BR>Total Units 1000<BR><BR>You then need to calculate to costs per unit taking into account the normal loss. Formula is:<BR><BR>Total Cost less Scrap value of normal loss = £7,650-£50<BR>_________________________________ __________ <BR><BR>Total Input less normal loss units =1000-50<BR><BR>Normal cost per unit = £8.00<BR><BR><BR>So to reflect this on a T account on the left side you would have the original cost of £7,650<BR><BR>On the right: The total output of 900 units @ 8.00=£7,200<BR> Normal Loss of 50 units @ £1.00=£50<BR> Abnormal Loss of 50 @ £8.00 =£400<BR> Total Cost of £7,650.00<BR><BR><BR>From the orginal T account you should be able to work out the rest of the answers.<BR><BR>Hope this helps<BR><BR><BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Process Query

    I will write these as journals<BR><BR>The transaction between the abnornal loss account and the normal loss account<BR><BR>Debit Normal Loss £50<BR>Credit Abnormal Loss £50<BR><BR><i>This shows that the abnormal loss has a scrap value, and as such this value is moved into the normal loss account so it can be scrapped</i><BR><BR><BR><b>This is the transaction you asked about</b> it shows the balance on the Abnormal loss being transferred to the P&L<BR><BR>Debit Profit and Loss £350<BR>Credit Abnormal loss £350<BR><BR><i> This takes the remaining value in the Abnormal Loss accountand treats it as a period cost in the P&L</i>

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