A company produces a single product that passes through two processes. The detai

Question

A company produces a single product that passes through two processes. The details for process 1 are as follows: Materials input Direct labour Production overheads 20,000 kg at $2-50 per kg $15,000 150% of direct labour Normal losses are 15% of input in process 1 and without further processing any losses can be sold as scrap for £1 per kg The output for the period was 18,500 kg from process 1 There was no work-in-progress at the beginning or end of the period. s no work-in. progress at the beginming or ess What is the value (to the nearest $) of the output to process 2?

Explanation / Answer

Answer:

Cost per unit = (Total process cost - Scrap value of normal loss) / (Inputs in process 1 - Normal loss)

= ($87,500 - $3,000) /(20,000 kgs - 3,000 kg) = $4.97 per kg

So the cost of total output = $18,500 * $4.97 = $91,945 (ans)

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