Costs of normal shrinkage and normal continuous losses in a process costing environment are handled by the method of neglect.

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Quizplus · Accepted Answer

Normal shrinkage and normal continuous losses are considered as a part of the manufacturing process and therefore are included in the cost of production. They are not separately accounted for but instead, they are handled by the method of neglect, where they are ignored and the cost is spread over the total output. This is true in a process costing environment, where the focus is on the average cost of production rather than the cost of individual units.

Costs of Normal Shrinkage and Normal Continuous Losses in a Process