Page 264 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I Manpreet Kaur, Lovely Professional University

Notes Unit 13: Normal Wastage, Abnormal Loss and Abnormal Gain

CONTENTS

Objectives
Introduction
13.1 Normal Wastage
13.2 Abnormal Loss
13.3 Abnormal Gain or Abnormal Effectives
13.4 Oil Refinery Processes

13.5 Summary
13.6 Keywords
13.7 Review Questions
13.8 Further Readings

Objectives

After studying this unit, you will be able to:
z z Define normal wastage;
z z Define abnormal loss;

z z Understand abnormal gain;
z z Identify oil refineries.

Introduction

Wastage represents the portion of a basic raw material lost in processing, having no recovery
value. Wastage may be visible, e.g. remnants of basic raw materials, or invisible, disappearance
of basic raw material through evaporation, smoke, etc. In process type of industry, wastage may
have lower reusable value.
Normally in each process, there is a residue left after transfer of the partially completed product
to the next process. For example, in case of crushing of oil seeds, oil produced will be passed on
to the refining process and oil cakes will be left. This is not wastage as it can be sold in the market.
But the quantity of oil produced plus the quantity of cake left will not equal the quantity of oil
seeds. It will be slightly less. The quantity not accounted for is a loss and effort should be to keep
it as low as possible. The residue, if it can be sold in the market and if it can be used as a material
for another finished product, is known as a by-product. In the process of converting coal into
coke, useful by-products such as coal tar, sulphate of ammonia are obtained.
13.1 Normal Wastage

This is the amount of loss which is unavoidable because of the nature of raw materials or the
production technique and is inherent in the normal course of production e.g., loss of weight
because of evaporation or melting etc. Such wastage may also take place while stamping product
components out of a big metal sheet. This wastage is normally expressed as a percentage of the

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