Accounting · Process Costing
'Ganga Paper Mills', a large integrated paper and pulp manufacturing unit, processes wood pulp through a series of sequential, continuous operations: Digestion, Washing and Screening, Bleaching, and Papermaking. At the end of the Bleaching stage, a small amount of residual sludge is identified as abnormal loss. Which of the following is the most appropriate cost accounting method for Ganga Paper Mills, and what is the correct accounting treatment for the Abnormal Loss identified in the Bleaching process?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Costing Method: Standard Costing. Abnormal Loss Treatment: Added to the cost of the good units produced in the process.
- 2Costing Method: Process Costing. Abnormal Loss Treatment: The cost of the abnormal loss is credited to the respective Process Account and charged to the Costing Profit and Loss Account.✓
- 3Costing Method: Batch Costing. Abnormal Loss Treatment: Charged to the Cost of Goods Sold (COGS) Account.
- 4Costing Method: Job Costing. Abnormal Loss Treatment: Charged to the Work-in-Progress (WIP) Account of the next process.
Correct answer
Costing Method: Process Costing. Abnormal Loss Treatment: The cost of the abnormal loss is credited to the respective Process Account and charged to the Costing Profit and Loss Account.
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