Spoilage is the unacceptable units of production that are discarded or sold for disposal value. Accountants should be able to distinguish between normal and abnormal spoilage. Differentiate the two types of spoilage as aforesaid. Please give explanation in details with example.

Spoilage is the unacceptable units of production that are discarded or sold for disposal value. Accountants should be able to distinguish between normal and abnormal spoilage. Differentiate the two types of spoilage as aforesaid. Please give explanation in details with example.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter2: Accounting For Materials

Section: Chapter Questions

Problem 30Q: After a product is inspected, some units may be classified as spoiled and others as defective. What...

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Question

Spoilage is the unacceptable units of production that are discarded or sold for disposal
value. Accountants should be able to distinguish between normal and abnormal spoilage.
Differentiate the two types of spoilage as aforesaid.

Please give explanation in details with example.

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Which of the following is true of abnormal spoilage? a. It is considered to be part of production. b. It is normally treated as a period cost c. It is normally treated as a product cost. d. It is prorated between cost of goods sold and inventory.
Whether any of the following sentences about abnormal spoiling is true? a. It is considered to be part of production.b. It is normally treated as a period costc. It is normally treated as a product cost.d. It is prorated between cost of goods sold and inventory.
“The inspection point is the key to the allocation of spoilage costs.” Do you agree? Explain.
After a product is inspected, some units may be classified as spoiled and others as defective. What distinguishes a product as being spoiled or defective?
Which of the following quality costs is an internal failure cost? a. Inspection of reworked units b. Lost sales because of products failing to meet specifications c. Replacing a defective product d. Training production line workers in new quality procedures
All of the following are accurate regarding the treatment of normal or abnormal spoilage by a rm with the exception of:a. Abnormal spoilage is excluded in the standard cost of a manufactured product.b. Normal spoilage is capitalized as part of inventory cost.c. Abnormal spoilage has no nancial statement impact.d. Normal and abnormal spoilage units affect the equivalent units of production
Which of the following is a false statement about scrap and by-products? Select one: a. Both scrap and by-products are incidental outputs to the joint process. b. Management’s goal is to produce both scrap and by-products. c. Both by-products and scrap are salable. d. A by-product has a higher sales value than does scrap.
The cost of lost future sales after a customer finds a defect in a product is which type of quality cost? a. Prevention cost b. Appraisal cost c. Internal failure cost d. External failure cost
Verifying repair costs will be handled differently from auditing depreciation costs. What's the rationale for the shift in strategy?
“The unit cost of normal spoilage is the same as the unit cost of abnormal spoilage.”Do you agree? Explain.
in a job-order costing system, the recovery value of scrap that is significant in economic value, abnormal and due to the nature of particular jobs should be credited to: Materials Work in Process Manufacturing Overhead Loss from Abnormal Spoilage
All of the following are accurate regarding the treatment of normal or abnormal spoilage by a firm with the exception of: a. Abnormal spoilage is excluded in the standard cost of a manufactured product. b. Normal spoilage is capitalized as part of inventory cost. c. Abnormal spoilage has no financial statement impact. d. Normal and abnormal spoilage units affect the equivalent units of production.