Normal and abnormal loss

In process costing, normal loss is expected unavoidable wastage absorbed by good output, while abnormal loss is wastage exceeding that expectation and is charged separately to the income statement.

ByHoang TruongUpdated June 30, 2026

FrameworkProcess costing

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1,000 kg of input is expected to yield 900 kg of good output — a normal, planned loss of 100 kg (10 per cent) whose cost is absorbed into the good units. Actual output comes in at only 880 kg, so there is a further 20 kg abnormal loss. That abnormal loss is valued at the same cost per unit as good output and written off directly to the income statement.

Where it fits

SubjectCost AccountingAdvancedTopicJoint Products, By-Products & SpoilageAdvanced

The formula

LaTeX

\text{Expected Output} = \text{Input Units} \times (1 - \text{Normal Loss Rate})

Variables

$E x p ec t e d O u tp u t$: Units of good output anticipated under normal operating conditions (units)
$I n p u t U ni t s$: Total units of material or input entered into the process (units)
$N or ma l L oss R a t e$: Fraction of input expected to be lost under standard conditions (—)

Normal loss rate is expressed as a decimal (e.g. 0.10 for 10% expected wastage)

LaTeX

\text{Cost per Unit of Good Output} = \frac{\text{Total Process Cost}}{\text{Expected Output Units}}

Variables

$T o t a l P r ocess C os t$: All costs charged to the process in the period (€)
$E x p ec t e d O u tp u t U ni t s$: Units expected after deducting normal loss from input (units)

Normal loss cost is absorbed by good output; abnormal loss units are valued at this same rate

Check yourself

PracticeCORE

A process uses 500 kg of raw material input. Normal loss is expected to be 10 per cent of input. Actual output is 410 kg. How many kilograms of abnormal loss has the process incurred?

Select an answer to check your understanding.