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What is meant by Process loss scrap and waste?

What is meant by Process loss scrap and waste?

Answers

Wilfred
This is divided into two:

1. Normal loss
- This represents loss which is expected under normal conditions. It is loss which is unavoidable in view of nature of the production processes. e.g., loss due to evaporation. Sometimes normally lost items are sold as scrap e.g. small pieces of cloth. Obtained when designing a skirt or a shirt may be sold pillows etc.
N/B: A fundamental feature of process costing is the determination of cost per unit of transfer from one process to the next. This cost per unit is influenced by the value of normal loss i.e. whether normal loss has value or not.
- Obtaining cost per unit of transfer
loss16820191012.png
N/B: If normal loss has no sales proceeds or the sales proceeds are less than the cost the amount of cost not recovered becomes part of the cost of the goods units.

2. Abnormal loss
- It represents a loss which occurs under abnormal circumstance. It is loss which cannot be foreseen e.g. loss due plant break down power failure industrial accident, inefficiency of worker use of defective low materials.
N/B: Abnormal loss items are valued at the cost of good units.
loss26820191012.png
Wilfykil answered the question on August 6, 2019 at 07:15

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