ECONOMICS

Detailed explanation-1: -Rule 1: expected output from a manufacturing process is the amount of the input less the normal loss. loss occurs. If actual output exceeds expected output an abnormal gain occurs. and abnormal loss or gain) – ie cost per unit for a period is total cost divided by expected output.

Detailed explanation-2: -Generally the cost of normal loss is absorbed by the cost units. Normal Output = Units introduced – Units of normal loss Normal Cost of Normal Output = Total Cost – Scrap value of Normal Loss. and if there is any scrap value then that will be shown in amount column of the credit side corresponding to lost units.

Detailed explanation-3: -A loss which occurs normally during the process of production is called as normal loss. When actual loss is less than the estimated loss it is considered as abnormal gain.

Detailed explanation-4: -Normal losses are expected as they occur at the normal process of production. In contrast, abnormal loss is unexpected, as they arise due to inefficiencies in the production process and can be avoided when the production environment is efficient. When normal loss is physical, i.e. as a scrap.

Detailed explanation-5: -The term “normal gain” refers to a situation in which a company’s total revenues are equal to its total costs in a perfectly competitive market. It signifies that the company generates enough money to pay its whole production costs while remaining competitive in its industry.