Use the Information Below to Answer the Following Question(s)

question 10

Multiple Choice

Use the information below to answer the following question(s) .Craft Concept manufactures small tables in its Processing Department.Direct materials are added at the initiation of the production cycle and must be bundled in single kits for each unit.Conversion costs are incurred evenly throughout the production cycle.Before inspection, some units are spoiled due to non-detectable materials defects.Inspection occurs at the end of the process.Spoiled units generally constitute 5 percent of the good units.Data for December are as follows:

-The costs of abnormal spoilage are

• A)locked-in in the product design stage.
• B)part of the inventoriable costs when units are reworked.
• C)included in the cost of goods manufactured.
• D)highlighted on the cash flow statement to draw the readers attention.
• E)written off as losses.

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Definitions:

Inflationary Gap

A situation where aggregate demand in an economy exceeds aggregate supply at the full employment level, leading to inflation.

Equilibrium GDP

The level of real GDP at which the total quantity of goods and services produced equals the total quantity of goods and services purchased.

Full Employment GDP

The output level of goods and services in the economy when all available labor resources are being used in the most efficient way possible.

Multiplier

A factor that quantifies how an initial change in economic activity (e.g., spending or investment) leads to a more than proportional change in the national income.