Normal loss in material handling is treated by:
ACharging to costing P&L
BSpreading over good output
CTreating as deferred revenue
DCapitalising as inventory
Answer & Solution
Correct answer: B. Spreading over good output
1. Normal losses are unavoidable losses inherent to the process.
2. Their cost is absorbed by good production by inflating the per-unit cost of remaining units.
3. Abnormal losses, on the other hand, are charged to the costing P&L account.
4. Hence normal loss is spread over good output.
_Source: ICAI BoS Inter Paper 3, Ch 2 "Material Cost", §2.8 ¶3_
Related questions
Annual usage 5,000 units; ordering cost ₹40; carrying cost 20 percent of price ₹20. OptimaMaximum stock level formula is:EOQ when discount is offered changes when:Abnormal loss in material processing is:Stores ledger records material movements in:VED analysis classifies stores items based on:Carrying cost ₹6/unit, ordering cost ₹120/order, annual demand 18,000 units. EOQ equals:Weighted average price after receipts of 100 units at ₹10 and 200 units at ₹13 is: