For Fiona Company, Defective Units of 2% of the Good

question 9

Multiple Choice

For Fiona Company, defective units of 2% of the good units completed are considered normal. Job #456 included some unusual specifications. Because of these, 5% of the units in Job #456 were defective. Which of the following is true?

• A) The cost of producing 3% of the units in Job #456 is abnormal spoilage.
• B) The cost of producing 2% of the units in Job #456 is part of overhead.
• C) The cost of producing 5% of the units in Job #456 is part of overhead.
• D) None of the above

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Definitions:

Partnership Investment

A contribution of assets by a partner to a partnership, often in exchange for a share of the partnership's profits.

Equipment

Assets used in the operation of a business or manufacturing process, which have a long-term use and value.

Income Ratio

A financial metric that compares various incomes to a particular benchmark, such as net income to sales or investment income to total assets.

Sharing Income

The distribution of profits among partners or shareholders in a business, often according to the proportion of ownership.