Which of the Following Statements Is True of Normal Spoilage

question 83

Multiple Choice

Which of the following statements is true of normal spoilage and abnormal spoilage?

• A) Normal spoilage is inherent in a particular production process, whereas abnormal spoilage is not inherent in a particular production process.
• B) Abnormal spoilage arises even when the process is carried out in an efficient manner, whereas normal spoilage does not arise when the process is carried out in an efficient manner.
• C) Normal spoilage is usually regarded as avoidable and controllable, whereas abnormal spoilage is unavoidable and uncontrollable.
• D) The costs of normal spoilage are recorded as a loss as a separate line item in an income statement, whereas costs of abnormal spoilage are included as a component of the costs of good units manufactured.

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Definitions:

Activity-based Costing

A costing method that identifies the activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

Overhead Costs

Expenses related to the operation of a business that cannot be directly attributed to a specific product or service, such as rent, utilities, and administration expenses.

Activity Rate

The predetermined overhead rate used in activity-based costing to allocate costs to products or services based on specific activities.

Activity-based Costing

A costing method that assigns costs to products or services based on the activities they require.