Normal Loss, Abnormal Loss and Abnormal Gain

## Normal Loss, Abnormal Loss and Abnormal Gain — Concepts

### Inputs

Record the units introduced into the process. If units introduced is not separately given, take kgs of raw material as units introduced.

### Normal Loss

During production, some units are lost normally (evaporation, shrinkage, etc.). The question will specify a percentage (e.g., "Normal loss is 10% of input").

• Normal loss units are valued at the Selling Price of such units (their scrap/realisable value).
• If no selling price is given, SP = 0.
• Normal loss is an expected, unavoidable cost — its cost is absorbed by good units (this is why we deduct its realisable value in the Normal Cost per Unit formula).

### Abnormal Loss

When loss occurs due to abnormal reasons (fire, machine breakdown, accidents) — or whenever actual loss > normal loss — the extra loss is Abnormal Loss.

```

Abnormal Loss Units = Total Inputs − Output Transferred − Normal Loss Units

```

(This formula assumes actual loss exceeds normal loss.)

Abnormal Loss is valued at Normal Cost per Unit (not at SP). This is because abnormal loss should not affect the cost of good units — it must be separately charged to costing P/L.

### Abnormal Gain

Generally, input material is either converted into FG or lost. But sometimes the actual loss is less than the expected normal loss — i.e., the process performed better than expected. This unexpected gain in units is called Abnormal Gain.

```

Abnormal Gain Units = Normal Loss Units − Actual Loss Units

```

Or equivalently, using the abnormal loss formula — if the result is negative, that magnitude is abnormal gain:

```

(Total Inputs − Output − Normal Loss) → if negative, it is Abnormal Gain

```

Abnormal Gain is calculated at Normal Cost per Unit.

### Output

The number of completed finished units produced — also measured at Normal Cost per Unit.

### Summary Valuation Table