ACCA Applied Knowledge · Management Accounting · Cost accounting methods
Which statement about abnormal loss in process costing is correct?
Abnormal loss is valued at the same cost per unit as good output, removed from the process account, and written off to the statement of profit or loss, net of any scrap proceeds. It is not included in the cost of good units.
- AIt is valued at the same cost per unit as good output and charged to the statement of profit or lossCorrect
- BIt is valued at its scrap value only and charged to the process account
- CIt is included in the cost of good output as a normal cost
- DIt is credited to the statement of profit or loss
Explanation
Abnormal loss is a loss above the expected level. It is credited to the process account at the same cost per unit as good output, and debited to an abnormal loss account, which is then written off to profit or loss (net of any scrap proceeds). It is not absorbed into good units' cost.
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