In process costing, how is the cost of a normal process loss generally treated?
Correct answer: B. It is absorbed by the good units produced
- A. It is charged entirely to the abnormal loss account
- B. It is absorbed by the good units produced
- C. It is transferred directly to the sales account
- D. It is ignored in calculating the process cost
Explanation
Normal loss is expected under efficient operating conditions, so its cost is usually borne by the units that successfully emerge from the process. Any scrap value of the loss may reduce the process cost.
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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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