Process Costing Terms - You should know this!!
Normal Loss - this is the term used to describe normal expected wastage under usual operating conditions. This may be due to reason such as evaporation, teasing, or rejects.
Abnormal Loss - this is when loss occurs over and able the normal expected loss. This may be due to reasons such as faulty machinery or errors by laborers.
Abnormal Gain - This occurs when the actual loss is lower than the normal loss. This could, for example, be due to greater efficiency from newly purchased machinery.
Work In Progress - this is therm used to describe units that are not yet complete at the end of the period. Opening WIP is the number of incomplete units at the start of a process and losing WIP is the number at the end of the process.
Scrap Value - sometimes the outcome of a loss can be sold for a small value. For example, in the production of screws there may be a loss such as metal wastage. This may be sold to a scrap merchant for a fee.
Equivalent units - this refers to a conversion of part-completed units into an equivalent number of wholly-copmleted units.
Abnormal Loss - this is when loss occurs over and able the normal expected loss. This may be due to reasons such as faulty machinery or errors by laborers.
Abnormal Gain - This occurs when the actual loss is lower than the normal loss. This could, for example, be due to greater efficiency from newly purchased machinery.
Work In Progress - this is therm used to describe units that are not yet complete at the end of the period. Opening WIP is the number of incomplete units at the start of a process and losing WIP is the number at the end of the process.
Scrap Value - sometimes the outcome of a loss can be sold for a small value. For example, in the production of screws there may be a loss such as metal wastage. This may be sold to a scrap merchant for a fee.
Equivalent units - this refers to a conversion of part-completed units into an equivalent number of wholly-copmleted units.