In a Process Costing System, Which Assumes That Normal Spoilage

question 9

Multiple Choice

In a process costing system, which assumes that normal spoilage occurs at the end of a process, the cost attributable to normal spoilage should be assigned to:

• A)Beginning work-in-process inventory.
• B)Ending work-in-process inventory.
• C)Cost of goods manufactured and ending work-in-process inventory in the ratio of units worked on during the period to units remaining in work-in-process inventory.
• D)Cost of goods manufactured (transferred out).
• E)A separate loss account in order to highlight production inefficiencies.

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Definitions:

Price-Earnings Ratio

A valuation metric for companies, calculated by dividing a company's share price by its earnings per share.

Earnings

The amount by which revenues exceed expenses.

Stockholders

Individuals or entities that own shares of stock in a corporation, thereby having a residual claim on the company's assets and earnings.

Solvency

This financial term refers to an entity's ability to meet its long-term financial obligations, indicating financial stability.