Normal and abnormal loss
Some loss is built into the work and expected, such as trimming, evaporation or spoilage. That is normal loss and belongs in the cost of what is produced. Loss beyond that allowance is abnormal and is reported as a loss of the period.
Abnormal loss = Actual loss − Normal loss allowance
Why it matters
If every loss is buried in the cost of production, waste hides inside prices. Separating the two shows how much waste is the price of doing this work and how much is avoidable.
Where it appears in a CFO+ model
- In activities that list waste, spoilage or loss among their cost lines.
- In the unit cost, where the normal allowance is part of what one unit costs.
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Activities where it shows up
No figures are published: a definition and a formula only.