The particulars relating to the import of sealing ring made by ABC Ltd are given below: (i) Sealing ring – 1,000 pieces invoiced £ 2 C.I.F. Bombay Port. (ii) Customs duty was paid @ 100 per cent on...

The particulars relating to the import of sealing ring made by ABC Ltd are given below:

(i) Sealing ring – 1,000 pieces invoiced £ 2 C.I.F. Bombay Port.

(ii) Customs duty was paid @ 100 per cent on invoice value (converted to Indian currency by adopting an exchange rate of Rs 70 per £).

(iii) Clearing charges – Rs 8,800 for the entire consignment, and

(iv) Freight charges – Rs 6,400 for transporting the consignment from Bombay 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. No refund for the broken material would be admissible as per the terms of 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 materials, and (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.