If a Spoilage Is Normal (Expected), the Cost of Spoiled

question 147

Multiple Choice

If a spoilage is normal (expected) , the cost of spoiled units is:

• A)recorded as a liability in the balance sheet.
• B)added to the cost of good units produced.
• C)assigned to the spoilage loss account.
• D)credited to the profit and loss account.

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Definitions:

Prime Costs

Refers to the direct costs of manufacturing a product, including direct materials and direct labor.

Conversion Costs

Expenses incurred when transforming raw materials into finished goods, typically including labor and overhead costs.

Direct Materials

Costs of raw materials that are directly involved in the manufacturing of a product and can be easily traced to it.

Finished Goods Inventory

The inventory of finished goods available for purchase but still not sold.