COST ACCOUNTING
PROCESS COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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When actual losses are greater than the normal loss level.
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When costs are reduced through increased machine speed
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When actual losses are less than the normal level.
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When the process output is greater than planned.
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Detailed explanation-1: -If the real production units are more than the expected units after deducting the ordinary or normal loss, the contrast between the two is known as abnormal gain.
Detailed explanation-2: -Abnormal Gain: If the actual production units are more than the anticipated units after deducting the normal loss, the difference between the two is known as abnormal gain. It is excluded from total cost due to which it does not affect the cost per unit of the product.
Detailed explanation-3: -1 An abnormal loss occurs when expected output exceeds actual output.
Detailed explanation-4: -Abnormal loss arises due to certain conditions like theft of goods, damage to goods due to substandard material, faulty equipment or natural calamities like fire, earthquake, floods, etc.
Detailed explanation-5: -Abnormal gains are usually gains of a non-recurring nature. For example, an unrealised gain from currency hedging would be written back as an abnormal because it is not congruent with the normal operations of the business.