In both process and job costing systems, the cost of normal spoilage is treated as ___________?
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Answer: C. inventoriable costs
Explanation
In both process and job costing systems the cost of normal spoilage is treated as an inventoriable product cost. Normal spoilage is considered an unavoidable outcome of operating an efficient manufacturing process and is absorbed by good units. Capitalizing these spoiled units into inventory ensures that product costs accurately reflect total production expenditures. Spoilage refers to output units that fail to meet customer quality specifications and are either discarded or sold for lower scrap value. Normal spoilage occurs under efficient operating conditions while abnormal spoilage represents avoidable waste charged as a period loss. Inventoriable costs remain attached to products as assets on the balance sheet until the merchandise is eventually sold to customers.
Option A refers to labor and overhead manufacturing inputs rather than the specific treatment category for spoiled output. Option B describes past expenditures that cannot be recovered which is incorrect since normal spoilage is capitalized into inventory. Option D is incorrect because normal spoilage is indeed inventoriable rather than expensed immediately as a period cost.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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