COST ACCOUNTING
PROCESS COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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While preparing the cost of production report of a processing department, the per unit cost from preceding department needs to be adjusted when the:
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normal loss is identified during the process
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normal loss is identified at the end of process
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abnormal loss is identified during the process
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abnormal loss is identified at the end of process
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Explanation:
Detailed explanation-1: -Abnormal Loss: If the units lost in the production process are more than the normal loss, the difference between the two is the abnormal loss. It is excluded from total cost due to which it does not affect the cost per unit of the product.
Detailed explanation-2: -An average cost per unit is determined by dividing the total cost by the total equivalent units, to ascertain the value of the units in process. Advantages: u Comparison between the cost of output and its market price at the stage of completion is facilitated.
Detailed explanation-3: -The normal loss is considered to be 10%.
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