In a Process Costing System, the Cost of Abnormal Spoilage

question 21

Multiple Choice

In a process costing system, the cost of abnormal spoilage should be:

• A)Prorated between units transferred out and ending inventory.
• B)Included in the cost of units transferred out.
• C)Treated as a loss in the period incurred.
• D)Added to overhead.

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Definitions:

Natural Monopolies

Industries where a single firm can supply a good or service to an entire market at a lower cost than two or more firms could, often due to economies of scale.

High Set-up Costs

Initial investments or expenses that are necessary to start a business or manufacturing process, which can act as a barrier to entry for new firms.

Industry

A sector of the economy that produces a specific type of goods or services, characterized by shared production processes or products.

Exclusive Right

A legal provision or agreement granting someone the sole authority to use, sell, or license a product, service, or intellectual property.