ECONOMICS

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COST ACCOUNTING

PROCESS COSTING

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Input in a process is 4000 units and normal loss is 20%. When finished output in the process is only 3, 240 units, there is an
A
Abnormal loss of 40 units
B
Abnormal gain of 40 units
C
Neither abnormal loss nor gain
D
Abnormal loss of 60 units
Explanation: 

Detailed explanation-1: -So this comes to 4000 units were put in process And out of this 20% will be the normal loss. So this comes to total 800 units. So This 800 units will be the normal loss.

Detailed explanation-2: -Solution(By Examveda Team) = 10000-(10000 × 20%) = 8000 units. = 8000-400 = 7600 units.

Detailed explanation-3: -Units of Abnormal Effectives(Gains) = Units entered – Normal Wastage – Actual output. Since production is continuous, there may be some units which are not finished at the end of an accounting period.

Detailed explanation-4: -The formula for calculating abnormal loss is as follows: Abnormal loss = Normal cost at normal production / (Total output – normal loss units) × Units of abnormal loss. Also read: Abnormal Loss.

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