Cases of abnormal gains

Cost/Management Accounting notes

In some instances, the actual output may be greater than expected or, put in other words, actual loss less than normal or expected. In such circumstances, abnormal gains are considered to have arisen.

The main objective of preparing the process account is to determine the cost per unit of expected
output (Normal output).

In a case where abnormal gains have no scrap value, (i.e. where if scrapped would not have a
value) the cost per expected output

>>> Illustration
BNY produces and sells an insecticide X. The following data relates to process II for the period just ended;

Normal loss in process II is usually 5% of the input


(a) Determine the cost per unit of unit transferred to department III

(b) Prepare the process account as it would appear clearly showing the abnormal loss or
gain, if any

(c) Assuming that the spoilt units can be sold to a farmer at Shs.10 per unit, prepare the
process account as it would appear in the books of BNY


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