Wooden Plywood Limited has a normal wastage of 5% in the production process. During the year 2023-24, the Company used 16,000 MT of Raw material…

(i) As per AS 2 'Valuation of Inventories', abnormal amounts of wasted materials, labour and other production costs are excluded from cost of inventories and such costs are recognised as expenses in the period in which they are incurred. The normal loss will be included in determining the cost of inventories (finished goods) at the year end. (ii) Material used 16,000 MT @190 = 30,40,000 Normal Loss (5% of 16,000 MT) 800 MT (included in calculation of cost of inventories) Net quantity of material 15,200 MT (iii) Abnormal Loss in quantity (950 - 800) 150 MT Abnormal Loss - 30,000 [150 units @200 (₹ 30,40,000/15,200)] Amount of 30,000 (Abnormal loss) will be charged to the Profit and Loss statement.