In process costing, how is an abnormal process loss normally treated?
Correct answer: B. Transferred to an abnormal loss account
- A. Added to the cost of normal output
- B. Transferred to an abnormal loss account
- C. Ignored because it is unavoidable
- D. Credited directly to the production account
Explanation
Abnormal loss is valued at the applicable process cost per unit and transferred to an abnormal loss account, which is ultimately charged to costing profit and loss. It is separated from normal loss because it is not expected under efficient operating conditions.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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