Manufacturing cost of a work order is Rs 1000, 8% of the production against that order spoiled and the rejection is estimated to have a realisable value of Rs 20 only. The normal rate of spoilage is 2%.
PLS TELL ME WHAT IS THE NORMAL LOSS AND ABNORMAL LOSS AND HOW THAT HAS COME.....PLS reply
i think the normal loss will br 15 rs and the abnormal loss will be 45rs.
sorry if it is wronmg it arise as under..............
=1000*8%= 80-20=60
=1000*2%= 20
=20-5=15
=60-15=45
as 20is recoverablw value of all spoilage so on that basis amount recoverable form noarma loss and abnoraml loss is 5 and 15
normal cost of normal production need to be found out first......
normal prodcustion = 98% ,scrap value of norma loss = 20*(2/8)= 5 rs
therefore normal cost of normal production = 1000 - 5 = 995 rs ( i.e cost of 98% normal output)
abnormal loss output = 8-2 = 6%
value of abnormal loss = 995 * ( 6 / 98) =61 rs
but scrap realisation of abnormall loss = 20 - 5 = 15 rs
therefore
abnormal loss charged to P&L is = 61 - 15 = 46 rs
normal loss has no individual recognition in ascertaining profit or loss it is absorbed by output...
this is the way to follow as per cost accoutning stnadards.......
CAclubindia
