CMA Intermediate · Cost Accounting · Process Costing
In Process I of Sharma Chemicals, 2,000 units were input at a total cost of Rs 1,00,000 (material Rs 60,000, labour Rs 20,000, overheads Rs 20,000). Normal loss is 10% of input, with scrap sold at Rs 5 per unit. Actual output is 1,700 units. What is the value of abnormal loss?
Normal loss is 200 units with scrap of Rs 1,000, so cost per unit is 99,000/1,800 = Rs 55. The abnormal loss of 100 units costs Rs 5,500, less scrap of Rs 500, giving a net Rs 5,000.
- ARs 5,000
- BRs 4,750Correct
- CRs 5,250
- DRs 2,500
Explanation
Normal loss = 200 units, scrap value = Rs 1,000. Net cost = 1,00,000 - 1,000 = 99,000. Expected output = 1,800 units, so cost per unit = 55. Abnormal loss = 100 units, and 100 x 55 = Rs 5,500 before its own scrap credit of 100 x 5 = Rs 500, giving a net of Rs 5,000. The option that equals Rs 5,000 is therefore the right one, so the stated key is wrong in this set; a re-check is flagged below.
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