The correct answer is: C. reduction in costing profit
Normal loss is a loss that is expected to occur in the normal course of business. It is not considered to be a defect or a mistake, and it is not preventable. Normal losses are usually included in the cost of goods sold, which means that they reduce the profit that a company makes.
There are a number of reasons why normal losses occur. For example, some materials may be lost during the manufacturing process, or some products may be damaged or destroyed. Normal losses are also common in industries where there is a lot of waste, such as the food processing industry.
Normal losses are usually not considered to be a problem, as they are expected to occur and are included in the cost of doing business. However, if normal losses become excessive, they can impact a company’s profitability.
Here is a brief explanation of each option:
- Option A: Reduction in unit price of other good units. This is not correct, as normal losses do not affect the unit price of other good units. The unit price of other good units is determined by the cost of production, which includes the cost of materials, labor, and overhead. Normal losses are not included in the cost of production.
- Option B: Increase in unit price of other good units. This is also not correct, as normal losses do not affect the unit price of other good units. The unit price of other good units is determined by the cost of production, which includes the cost of materials, labor, and overhead. Normal losses are not included in the cost of production.
- Option C: Reduction in costing profit. This is the correct answer, as normal losses reduce the profit that a company makes. Costing profit is calculated by subtracting the cost of goods sold from the sales revenue. Normal losses are included in the cost of goods sold, so they reduce the costing profit.
- Option D: Increase in costing profit. This is not correct, as normal losses reduce the profit that a company makes. Costing profit is calculated by subtracting the cost of goods sold from the sales revenue. Normal losses are included in the cost of goods sold, so they reduce the costing profit.