KL Processing Limited has identified that an abnormal gain of 160 litres occurred in its refining process last week. Normal losses are expected and have a scrap value of £2.00 per litre. All losses are 100 per cent complete as to material cost and 75 per cent complete as to conversion costs.

The company uses the weighted average method of valuation and last week’s output was valued using the following costs per equivalent unit:

Materials £9.40 Conversion costs 2 EB)

The effect on the profit and loss account of last week’s abnormal gain is:

(a) Debit £2528

(b) Debit £2828

(c) Credit £2528

(d) Credit £2848

(e) Credit £3168

(2 marks)
CIMA Stage 2