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CMA Intermediate · Cost Accounting · Job Costing

Job 7 of Sundaram Tools: material Rs 60,000, labour Rs 30,000, overheads Rs 30,000, for 100 units. Inspection finds 10 abnormal spoiled units, completed to the stage of inspection with full cost, sold as scrap at Rs 100 each. What is the cost per good unit and the abnormal loss charged to Costing P&L?

Cost per unit is Rs 1,200 because abnormal spoilage is not borne by good units. The abnormal loss is 10 units at Rs 1,200, which is Rs 12,000, less scrap of Rs 1,000, giving Rs 11,000 charged to Costing Profit and Loss.

  1. ARs 1,200 per unit; loss Rs 11,000Correct
  2. BRs 1,200 per unit; loss Rs 12,000
  3. CRs 1,333 per unit; loss Rs 12,000
  4. DRs 1,200 per unit; loss Rs 11,000 and good units Rs 1,080

Explanation

Total cost 1,20,000 over 100 units = Rs 1,200 per unit. Abnormal spoilage cost = 10 x 1,200 = 12,000, less scrap 1,000 = Rs 11,000 charged to Costing P&L. Good units (90) are costed at 1,200 each = 1,08,000. Rs 12,000 ignores scrap; Rs 1,333 wrongly divides by 90.

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