ACCA Applied Knowledge · Management Accounting · Cost accounting methods
In Process C, 5,000 kg are input at a total cost of $27,000. Normal loss is 20% of input and scrap sells for $1.50 per kg. Actual output is 3,600 kg. What is the abnormal loss account figure, i.e. the abnormal loss valued before its scrap proceeds are offset?
Abnormal loss is 400 kg and valued at $6.375 per kg, giving $2,550.
- A$1,350Correct
- B$1,200
- C$1,500
- D$1,920
Explanation
Normal loss = 1,000 kg, scrap value $1,500. Net cost = 27,000 − 1,500 = $25,500. Expected output = 4,000 kg, so cost per kg = $6.375. Abnormal loss = 400 kg, costing 400 × 6.375 = $2,550. Hence no option matches this; the value is $2,550.
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