CMA Intermediate · Cost Accounting · Process Costing
In a process costing system, the cost of abnormal loss units is best treated as follows:
Abnormal loss is valued like good output, its scrap value is set off, and the net amount is written off to the Costing Profit and Loss Account. It is not loaded onto good units, because it is avoidable and not part of normal production cost.
- AAdded to the cost of good units of the same process
- BCharged to the Costing Profit and Loss Account at the full cost per unit, net of scrap valueCorrect
- CCarried forward as part of closing work-in-progress
- DDeducted from the cost of the next process
Explanation
Abnormal loss arises from avoidable causes and is valued at the same cost per unit as good output. The realisable value of its scrap is credited to the abnormal loss account, and the net balance is written off to the Costing Profit and Loss Account. Adding it to good units (option A) is the treatment for normal loss only.
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