Anuj Jain (pqr) 12 October 2012
this is ANUJ
i would like to know , how the treatment of normal loss in process costing
i have given normal loss @ 10% and there is Opening WIP And As well as Closing WIP with abnormal loss too.
whether i calculate normal loss on total input ( unit introduce+ OPening WIP) or
calculate on expected output ( Unit Introduceed+ opening WIP - Closing WIP)
Normal loss will be calculated only on the new units introduced unless otherwise specified.
Opening WIP will not be taken into consideration because normal loss on that would have already be taken into account when the account was closed previously.
Hence normal loss is calculated only on new units introduced. But in all the books it is calculated on (opening wip + units introduced)
EXPLAIN IT PLEASE..............
T S D ( ) 12 October 2012
I have already responded to your question previously.
I am now posting it once again.
Calculation of loss is dependant on the method used to express the loss.
Usually, in process costing, each process is considered seperate. And so, the opening WIP represent the stock available for the process. Normal loss is the loss of units in a particular process. Though normal loss is already accounted for in the opening WIP, that would be of earlier process. Hence normal loss may be computed on (Op. WIP + Inputs).
If there is no specific mention in the question, the loss is to be calculated based on gross input. Normal Loss units = Gross Input x Expected percentage of normal Loss.
Read more at: /forum/conceptual-help-223265.asp#.UHfej2_Mh6E