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# Learn Financial Freedom Step by Step

Following are the main differences of normal loss and abnormal loss.

1. Nature

Normal loss in manufacturing of any product is the loss which we can not stop through any control. This loss only increase the cost of our per product production. This is natural loss.

Abnormal loss is that loss which we can stop by better control on production process. So, we do not increase the cost per unit due to this loss. When this loss happened, both quantity and value of stock will decrease, so, cost per unit will not increase

2. Examples

Evaporation, spoilage, shrinkage are normal loss

Loss due to careless of machine or property, theft and cheat by team member.

3. Formula for Calculating

Normal Counting or measure after processing in production is normal loss quantity or unit

Abnormal Loss Value =  Abnormal loss = {Normal cost at normal production / (Total output – normal loss units)} X Units of abnormal loss

4. Valuation

We can not value of normal loss, yes if it will sell in scrap, our cost per unit will decrease after normal loss

because if we produce 100 unit and no normal loss , cost per unit = 1000/100 = Rs. 10 per unit

10 unit are normal loss and its cost is =  Rs. 1000/90 = Rs. 11.11

cost increase due to normal loss = Rs. 1.11

If this normal 10 units sale in scrap like iron chair making and sold per unit Rs. 5

Rs. 50

Now, our cost per unit will decrease = Rs. 950 / 90 = Rs. 10.50 per unit

We can calculate the value of abnormal loss with this formula

Abnormal Loss Value =  Abnormal loss = {Normal cost at normal production / (Total output – normal loss units)} X Units of abnormal loss

and it will not increase the value of cost of unit per unit

5. Estimate

We can easily estimate because it is normal. For example for making one wood chair , we can calculate the total quantity loss of wood.

We can not estimate abnormal loss. Like an laborer theft our material.

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