Normal loss – meaning

Normal loss is an unavoidable loss which occurs due to the inherent nature of the materials and production process under normal conditions. It is normally estimated on the basis of past experience of the industry. It may be in the form of normal wastage, normal scrap, normal spoilage, and normal defectiveness.

If the normal loss units can be sold as a scrap then the sale value is credited with process account. If some rectification is required before the sale of the normal loss, then the cost of rectification is debited in the process account.

The cost per unit of a process is calculated after adjusting the normal loss. In case of Normal Loss the cost per unit is calculated by the under given formulae.

Cost of Good Unit = UnitsLossNormalInputScrap

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