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Calculate normal loss in kilos.

Business/Management

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3 parts
a

4,500 kilos\text{4,500 kilos}

b

150 kilos\text{150 kilos}

c

KSh 8.70\text{KSh 8.70}

Step-by-step solution

7 steps

Part a· 2 steps

Calculate the expected output in kilos

  1. Calculate normal loss in kilos.

    Normal loss is 10% of input materials.

    Normal loss=10%×5,000 kilos=0.10×5,000 kilos=500 kilos\text{Normal loss} = 10\% \times 5,000 \text{ kilos} = 0.10 \times 5,000 \text{ kilos} = 500 \text{ kilos}

  2. Calculate expected output.

    Expected output is input materials minus normal loss.

    Expected output=5,000 kilos−500 kilos=4,500 kilos\text{Expected output} = 5,000 \text{ kilos} - 500 \text{ kilos} = 4,500 \text{ kilos}

    The expected output is 4,500 kilos\boxed{\text{4,500 kilos}}.

Part b

150 kilos\text{150 kilos}

The abnormal loss/gain in kilos

  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.

  2. Calculate abnormal gain.

    Abnormal gain=Actual output−Expected output\text{Abnormal gain} = \text{Actual output} - \text{Expected output} Abnormal gain=4,650 kilos−4,500 kilos=150 kilos\text{Abnormal gain} = 4,650 \text{ kilos} - 4,500 \text{ kilos} = 150 \text{ kilos}

    The abnormal gain is 150 kilos\boxed{\text{150 kilos}}.

Part c

KSh 8.70\text{KSh 8.70}

The cost per kg (NET INCOME METHOD)

  1. Calculate the scrap value of normal loss.

    Scrap value per kilo = KSh 2.7
    Normal loss = 500 kilos

    Scrap value of normal loss=500 kilos×KSh 2.7/kilo=KSh 1,350\text{Scrap value of normal loss} = 500 \text{ kilos} \times \text{KSh } 2.7/\text{kilo} = \text{KSh } 1,350

  2. Calculate the net cost.

    Total cost incurred = KSh 40,500

    Net cost=Total cost incurred−Scrap value of normal loss\text{Net cost} = \text{Total cost incurred} - \text{Scrap value of normal loss} Net cost=KSh 40,500−KSh 1,350=KSh 39,150\text{Net cost} = \text{KSh } 40,500 - \text{KSh } 1,350 = \text{KSh } 39,150

  3. Calculate the cost per kg.

    The cost per kg is calculated by dividing the net cost by the expected output (good units).

    Cost per kg=Net costExpected output\text{Cost per kg} = \frac{\text{Net cost}}{\text{Expected output}} Cost per kg=KSh 39,1504,500 kilos=KSh 8.70/kilo\text{Cost per kg} = \frac{\text{KSh } 39,150}{4,500 \text{ kilos}} = \text{KSh } 8.70/\text{kilo}

    The cost per kg is KSh 8.70\boxed{\text{KSh 8.70}}.

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