a) Calculate the expected output in kilos Step 1: Calculate normal loss in kilos. Normal loss is 10% of input materials. $$ \text{Normal loss} = 10\% \times 5,000 \text{ kilos} = 0.10 \times 5,000 \text{ kilos} = 500 \text{ kilos} $$ Step 2: Calculate expected output. Expected output is input materials minus normal loss. $$ \text{Expected output} = 5,000 \text{ kilos} - 500 \text{ kilos} = 4,500 \text{ kilos} $$ The expected output is $\boxed{\text{4,500 kilos}}$. b) The abnormal loss/gain in kilos Step 1: Compare actual output with expected output. Actual output = 4,650 kilos Expected output = 4,500 kilos Since actual output is greater than expected output, there is an abnormal gain. Step 2: Calculate abnormal gain. $$ \text{Abnormal gain} = \text{Actual output} - \text{Expected output} $$ $$ \text{Abnormal gain} = 4,650 \text{ kilos} - 4,500 \text{ kilos} = 150 \text{ kilos} $$ The abnormal gain is $\boxed{\text{150 kilos}}$. c) The cost per kg (NET INCOME METHOD) Step 1: Calculate the scrap value of normal loss. Scrap value per kilo = KSh 2.7 Normal loss = 500 kilos $$ \text{Scrap value of normal loss} = 500 \text{ kilos} \times \text{KSh } 2.7/\text{kilo} = \text{KSh } 1,350 $$ Step 2: Calculate the net cost. Total cost incurred = KSh 40,500 $$ \text{Net cost} = \text{Total cost incurred} - \text{Scrap value of normal loss} $$ $$ \text{Net cost} = \text{KSh } 40,500 - \text{KSh } 1,350 = \text{KSh } 39,150 $$ Step 3: Calculate the cost per kg. The cost per kg is calculated by dividing the net cost by the expected output (good units). $$ \text{Cost per kg} = \frac{\text{Net cost}}{\text{Expected output}} $$ $$ \text{Cost per kg} = \frac{\text{KSh } 39,150}{4,500 \text{ kilos}} = \text{KSh } 8.70/\text{kilo} $$ The cost per kg is $\boxed{\text{KSh 8.70}}$.