Calculate the value of normal loss, abnormal gain, and finished goods if the actual output is 4,650 kilos.

Question

ScanSolve AI Tutor · Accepted Answer

Here are the process account and abnormal loss/gain accounts for the period.

Common Data Used:

Input materials: 5,000 kilos
Normal loss: 10% of input = 500 kilos
Expected output: 4,500 kilos
Total cost incurred: KSh 40,500
Scrap value per kilo of normal loss: KSh 2.7
Cost per kg (calculated in part c)): KSh 8.70

b) i) If the actual output is 4,650 kilos

Calculate abnormal gain.
$\text{Abnormal gain} = \text{Actual output} - \text{Expected output}$ $\text{Abnormal gain} = 4,650 \text{ kilos} - 4,500 \text{ kilos} = 150 \text{ kilos}$
Calculate the value of normal loss.
$\text{Value of normal loss} = 500 \text{ kilos} \times \text{KSh } 2.7/\text{kilo} = \text{KSh } 1,350$
Calculate the value of abnormal gain.
$\text{Value of abnormal gain} = 150 \text{ kilos} \times \text{KSh } 8.70/\text{kilo} = \text{KSh } 1,305$
Calculate the value of finished goods.
$\text{Value of finished goods} = 4,650 \text{ kilos} \times \text{KSh } 8.70/\text{kilo} = \text{KSh } 40,455$
Prepare the Process Account.
$\begin{array}{l|r||l|r} \multicolumn{4}{c}{\textbf{Process Account}} \\ \hline \text{Particulars} & \text{KSh} & \text{Particulars} & \text{KSh} \\ \hline \text{To Cost Incurred} & 40,500 & \text{By Normal Loss (Scrap)} & 1,350 \\ \text{To Abnormal Gain} & 1,305 & \text{By Finished Goods A/c} & 40,455 \\ \hline & \textbf{41,805} & & \textbf{41,805} \\ \hline \end{array}$
Prepare the Abnormal Gain Account.
$\begin{array}{l|r||l|r} \multicolumn{4}{c}{\textbf{Abnormal Gain Account}} \\ \hline \text{Particulars} & \text{KSh} & \text{Particulars} & \text{KSh} \\ \hline \text{To Process A/c} & 1,305 & \text{By Income Statement} & 1,305 \\ \hline & \textbf{1,305} & & \textbf{1,305} \\ \hline \end{array}$
b) ii) If the actual output is 4,400 kilos
Calculate abnormal loss.
$\text{Abnormal loss} = \text{Expected output} - \text{Actual output}$ $\text{Abnormal loss} = 4,500 \text{ kilos} - 4,400 \text{ kilos} = 100 \text{ kilos}$
Calculate the value of normal loss.
$\text{Value of normal loss} = 500 \text{ kilos} \times \text{KSh } 2.7/\text{kilo} = \text{KSh } 1,350$
Calculate the value of abnormal loss.
$\text{Value of abnormal loss} = 100 \text{ kilos} \times \text{KSh } 8.70/\text{kilo} = \text{KSh } 870$
Calculate the value of finished goods.
$\text{Value of finished goods} = 4,400 \text{ kilos} \times \text{KSh } 8.70/\text{kilo} = \text{KSh } 38,280$
Prepare the Process Account.
$\begin{array}{l|r||l|r} \multicolumn{4}{c}{\textbf{Process Account}} \\ \hline \text{Particulars} & \text{KSh} & \text{Particulars} & \text{KSh} \\ \hline \text{To Cost Incurred} & 40,500 & \text{By Normal Loss (Scrap)} & 1,350 \\ & & \text{By Finished Goods A/c} & 38,280 \\ & & \text{By Abnormal Loss} & 870 \\ \hline & \textbf{40,500} & & \textbf{40,500} \\ \hline \end{array}$
Prepare the Abnormal Loss Account.
$\begin{array}{l|r||l|r} \multicolumn{4}{c}{\textbf{Abnormal Loss Account}} \\ \hline \text{Particulars} & \text{KSh} & \text{Particulars} & \text{KSh} \\ \hline \text{To Process A/c} & 870 & \text{By Income Statement} & 870 \\ \hline & \textbf{870} & & \textbf{870} \\ \hline \end{array}$

Calculate the value of normal loss, abnormal gain, and finished goods if the actual output is 4,650 kilos.

Step-by-step solution

Calculate abnormal gain.

Calculate the value of normal loss.

Calculate the value of abnormal gain.

Calculate the value of finished goods.

Prepare the Process Account.

Prepare the Abnormal Gain Account.

Calculate abnormal loss.

Calculate the value of normal loss.

Calculate the value of abnormal loss.

Calculate the value of finished goods.

Prepare the Process Account.

Prepare the Abnormal Loss Account.

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