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.

Question

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.

Quizplus · Accepted Answer

Abnormal spoilage costs are considered losses and are not included in the cost of goods manufactured or inventoriable costs. They are typically written off as losses in the financial statements.

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