Final answer:
The abnormal gain at cost per unit is offset against scrap value to avoid double-counting in cost calculations, ensuring accurate financial reporting and cost management. The correct option is d.
Step-by-step explanation:
The question is asking why abnormal gain at cost per unit is often offset against abnormal gain at scrap value. The correct answer is D. To avoid double-counting abnormal gains in cost calculations. Abnormal gain is typically accounted for at the cost per unit and also at the scrap value, and by offsetting these against each other, the integrity of the cost calculations is maintained. Essentially, if these gains were not offset, it could result in an inflated representation of profitability, leading to inaccurate financial reporting and potential distortions in cost management and pricing strategies.
Measurements of costs in business, such as total cost, average cost, and marginal cost are important in understanding the financial impact of production. These measures of cost are used to adjust for the financial impact of various factors including abnormal gains or losses, and are essential in ensuring that companies do not unfairly benefit or suffer from exceptional production outcomes. Accurately reflecting the value of outputs in cost per unit is crucial for sound business decision-making and regulatory compliance.