Final answer:
D. To avoid double-counting abnormal losses in cost calculations.
Abnormal losses at cost are offset by any scrap value to avoid double-counting and overstatement in cost calculations, ensuring accurate representation of financial and cost data.
Step-by-step explanation:
The question pertains to why abnormal loss at cost per unit is often offset against abnormal loss at scrap value. The correct answer to this question is option D: To avoid double-counting abnormal losses in cost calculations.
Abnormal losses are identified to ensure the losses do not inflate the cost of production, thereby, misrepresenting the actual cost per unit. When an abnormal loss occurs, it's necessary to account for any potential scrap value which could partially offset the loss.
Recognizing the scrap value against the abnormal loss ensures that the loss reported only reflects the net effect on costs.
This approach avoids inaccuracies in cost assessment and prevents any overstatement of losses, thus maintaining the integrity of financial accounting and cost management.
The reason why abnormal loss at cost per unit is often offset against abnormal loss at scrap value is to reduce the impact of abnormal losses on overall costs.
By offsetting abnormal loss at cost per unit against abnormal loss at scrap value, the company can effectively adjust for the financial impact of abnormal losses on scrap value and avoid double-counting abnormal losses in cost calculations.