Explain Normal and Abnormal Costs.
Normal Cost are the normal or regular costs which are incurred in the normal conditions during the normal operations of the organization. They are the sum of actual direct materials cost, actual labour cost and other direct expense. Example: repairs, maintenance, salaries paid to employees.
Abnormal Cost are the costs which are unusual or irregular which are not incurred due to abnormal situation s of the operations or productions. Example: destruction due to fire, shut down of machinery, lock outs, etc.