ACCA F2 - Management Accounting
Example with abnormal (unexpected) gain or loss,
with/without scrap value
Production Situation:
Process 1
|
Process 2
|
Material X - 10kg @ $10/kg
Conversion charge - $4.5 per kg of material X
Scrap produced =10% and can be sold at $1/kg
Actual output -9.5kg
|
Material Y - 2kg @ $20/kg
Conversion charge -$12 per kg of material Y
|
Process 1 account (treat like inventory)
|
|||||
Increase Debit
|
kg
|
$
|
Decrease Credit
|
kg
|
$
|
Material
|
10
|
100
|
Normal loss
|
1
|
1
|
Conversion
|
45
|
Transfer to process 2
|
9.5@$16**
|
152
|
|
Abnormal Gain
|
0.5@ $16
|
8
|
|||
10.5
|
153
|
10.5
|
153
|
||
Average cost per unit = ($145-$1)/(10-1) =144/9 = $16**
Scrap account (Treat like inventory)
|
|||||
Increase Debit
|
kg
|
$
|
Decrease Credit
|
kg
|
$
|
Process 1(Normal Loss)
|
1
|
1
|
Abnormal Gain
|
.5
|
.5
|
Bank
|
.5
|
.5
|
|||
1
|
1
|
1
|
1
|
||
Abnormal Gain (Any gain transferred to scrap or income
statement decreases the value of AG)
|
|||||
Decrease Debit
|
kg
|
$
|
Increase Credit
|
kg
|
$
|
Scrap account
|
.5
|
.5
|
Process 1
|
.5
|
8
|
Income Statement
|
7.5
|
||||
.5
|
8
|
.5
|
8
|
||
Process 2 account
|
|||||
Increase Debit
|
kg
|
$
|
Decrease Credit
|
kg
|
$
|
Transfer form process 1
|
9.5
|
152
|
|||
Material
|
2
|
40
|
Normal loss
|
-
|
-
|
Conversion
|
24
|
Finished goods
|
11.5
|
216
|
|
11.5
|
216
|
11
|
216
|
||
Average cost per unit = 216/11.5 = 18.78261
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