The particulars relating to the import of sealing ring invoiced by AB and Co., during December 2002
Question:
The particulars relating to the import of sealing ring invoiced by AB and Co., during December 2002 are given below:
(a) Sealing ring 1,000 pieces @ $2.00 CIF Bombay Port.
(b) Customs duty was paid @ 100% on invoice value (which was converted to Indian currency by adopting an exchange rate of Rs. 17.20 per $).
(c) Clearing charges Rs. 1,800 for the entire consignment.
(d) Freight charges Rs. 1,400 for transporting the consignment from Mumbai port to factory premises.
It was found on inspection that 100 pieces of the above material were broken, and therefore, rejected. There is no scrap value for the rejected part. Also, no refund for the broken material would be admissible as per the terms of the contract. The management decided to treat 60 pieces as normal loss and the rest 40 pieces as abnormal loss. The entire quantity of 900 pieces was issued to production.
Calculate:
(a) Total cost of material.
(b) Unit cost of material issued to production.
Also state briefly how the value of 100 pieces rejected in inspection will be treated in costs.
Step by Step Answer: