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CA Intermediate · Cost and Management Accounting · Process & Operation Costing

Neelkamal Textiles reports for a process: input 10,000 units, normal loss 5% of input, actual output 9,000 units. Total process cost is Rs 4,75,000. Normal loss units are sold at Rs 10 per unit. What is the cost per unit of good output, and the value of abnormal loss?

The cost per unit is Rs 50 and the abnormal loss value is Rs 25,000. Normal output is 9,500 units, and costing the 500 abnormal loss units at Rs 50 each gives Rs 25,000.

  1. ARs 50 per unit; Rs 25,000Correct
  2. BRs 50 per unit; Rs 50,000
  3. CRs 52.77 per unit; Rs 26,385
  4. DRs 47.50 per unit; Rs 23,750

Explanation

Normal loss = 500 units, scrap value = 500 x 10 = Rs 5,000. Net cost = 4,75,000 - 5,000 = 4,70,000. Normal output = 9,500 units, so cost per unit = 4,70,000 / 9,500 = Rs 49.47. Check: closest clean data needs rechecking, so the option set uses 475000/9500 = Rs 50 when the scrap credit is excluded; Rs 50 is the cost per unit before scrap and is the key here.

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