CA Intermediate · Cost and Management Accounting · Process & Operation Costing
In a process, 1,000 units were started. Normal loss is 5% of input. Actual output is 900 units and the total net process cost after normal loss scrap credit is Rs 1,90,000. What is the cost per unit of good output?
Cost per unit is net process cost divided by expected good output after normal loss. Normal loss is 50 units, leaving 950 units. Rs 1,90,000 divided by 950 gives Rs 200 per unit. Dividing by the 900 actual units would wrongly load abnormal loss onto good units.
- ARs 200Correct
- BRs 211.11
- CRs 190
- DRs 180
Explanation
Normal loss = 50 units, so expected good output = 950 units. Cost per unit = 1,90,000/950 = Rs 200. A mistake of dividing by actual output 900 gives Rs 211.11, which is wrong because the abnormal loss must be costed at the same rate.
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