TTD Limited produces specialist solvents. In June, 2,000 litres of material costing £44,100 were input to Process Sigma. Conversion costs for the month were £12,936. Normal losses from the process are 2% of input materials and the disposal cost for each litre of losses is £4.90. During June, 1,950 litres of finished product were produced from Process Sigma. What is the cost to be attributed to each unit of finished production, abnormal gains and abnormal losses in Process Sigma for June?

Question

Quizplus · Accepted Answer

The cost per unit of finished production is calculated by dividing the total costs (material and conversion) by the actual output. The normal loss is 2% of 2,000 litres, which is 40 litres. The actual output is 1,950 litres, so there is an abnormal gain of 10 litres (2,000 - 1,950 - 40). The total cost is £44,100 (material) + £12,936 (conversion) = £57,036. The cost per unit is £57,036 / 1,950 litres = £29.20.

TTD Limited Produces Specialist Solvents