answer:
To find the cost of the abnormal loss, we need to calculate the total cost of production and deduct the cost of normal losses.
Given information:
- Material cost: 20,000 kg
- Labour cost: $26,000
- Production overhead cost: $12,000
- Output: 18,800 kg
- Normal losses: 5% of input
To calculate the cost of abnormal loss, we need to first determine the cost per kilogram of the input material.
Total cost of production = Material cost + Labour cost + Production overhead cost
Total cost of production = $20,000 + $26,000 + $12,000
Cost per kilogram of input material = Total cost of production / Input material
Cost per kilogram of input material = (Material cost + Labour cost + Production overhead cost) / (Input material)
Cost per kilogram of input material = (Total cost of production) / (20,000 kg)
Next, we can calculate the cost of normal loss.
Normal loss = 5% of input material
Cost of normal loss = Cost per kilogram of input material × Normal loss
Finally, we can calculate the cost of abnormal loss by subtracting the cost of normal loss from the total cost of production.
Cost of abnormal loss = Total cost of production - Cost of normal loss
To summarize:
1. Calculate the total cost of production by adding the material cost, labor cost, and production overhead cost.
2. Calculate the cost per kilogram of the input material by dividing the total cost of production by the input material quantity.
3. Calculate the cost of normal loss by multiplying the cost per kilogram of input material by the normal loss percentage.
4. Calculate the cost of abnormal loss by subtracting the cost of normal loss from the total cost of production.
Based on the given information, the cost of the abnormal loss can be calculated using the above steps. The options provided are (a) $437, (b) $441, (c) $460, and (d) $465.
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