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Process costing

In calculating equivalent production â?¢for the normal loss why there is no equivalent units calculated? â?¢ for the abnormal gain/yield why it is treated as 100% complete respect of all cost elements irrespective of percentage of completion.


Swathi Krishna

Swathi Krishna

CA Inter

7K+

24-Aug-20 08:59

17

Answers (3)

Best Answer

In case of Normal loss, the items in loss will be sold for scrap value so there is no need to calculate equivalent units for this. Abnormal gain refers to the production of units which is more than what you expected. For example, if you expect the output to be 100 units, but at the end of the process you receive 105 units. The 5 units produced in excess to your expectation are called abnormal gain units. So abnormal gain is when the whole process of production is complete and you receive some units more than what you expect. Hence, all the cost elements in case of Abnormal gain are taken to be 100% complete.


Madhuri Veluri

Madhuri Veluri

Moderator

24-Aug-20 14:05

Thank you ma'am


Swathi Krishna

Swathi Krishna

CA Inter

7K+

24-Aug-20 14:06

Normal loss cost will be distributed to good units so normal loss units are not considered


VIJAYA SARADHI MAGANTI

VIJAYA SARADHI MAGANTI

CA Foundation

850

24-Aug-20 15:32