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Chapter 9

5.3 Abnormal gain

An abnormal gain is less loss than expected – a decrease in the normal
loss and an increase in good output. This is not treated as part of
normal production cost and is separately identified and costed in the
process account.

At the start of a heating process 1,000 kg of material costing $18 per kg
is input. Normal loss is expected to be 10% of input. Labour costs are
$1,800 and overheads are $900. Output was 950 kg.

Step 1 – balance the units and determine any loss/gain

Input = Output + Loss

1,000kg + 50(AG) = 950 + 100 NL

Step 2 – consider the costs

$18,000 + $1,800 + $900 = $20,700 (NL has no value)

Step 3 – calculate the average cost per unit

The cost per unit = net cost of inputs ÷ expected output

The cost per unit = $20,700 ÷ (1,000kg × 90%) = $23 per unit

Step 4 – value the output and complete the process account

Process account
Kg $ Kg $

Materials 1,000 18,000 Output 950 21,850
Labour 1,800 Normal loss 100 0

Overheads 900
Abnormal gain 50 1,150
––––– –––––– ––––– ––––––

1,050 21,850 1,050 21,850

––––– –––––– ––––– ––––––

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