Meaning and Computation of abnormal effectives
More output over the expected or normal output realized is called an abnormal gain. Abnormal gain arises because of an abnormal effective in the use of raw material or efficiency in performance so it is known as abnormal effective. Abnormal gain reduces the normal loss quantity so it comes in the form of profit to the industry. The value of an abnormal gain is assessed on the basis of production cost.
Method of determining the value of abnormal gain:
Value of abnormal gain = (Normal cost of normal output/Normal output) Abnormal gain qty.