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3. How do you differentiate 'Normal Process Losses' from 'Abnormal process Losses'. (6 marks)

3. How do you differentiate 'Normal Process Losses' from 'Abnormal process Losses'. (6 marks)

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Answer #1

Normal Process Loss - This is an anticipated loss e.g. 15% of materials used are expected to be damaged, this is a normal loss where a fixed percentage of the damage is already anticipated. Normal loss increases the cost of production of the usable goods.

Abnormal Process Loss - The loss realized over the Normal loss is an abnormal loss, e.g. 20% of materials used are actually damaged therefore 5% is your abnormal loss, this is not an anticipated loss, and the amount of the loss is charged to the profit and loss account.

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