When abnormal rework is distinguished from normal rework, and charged to a separate loss account, which of the following is a likely result?
A)Prices will have to increase on the company's products accordingly.
B)The amount of normal spoilage unfavourable efficiency variances will be less.
C)The amount of normal spoilage unfavourable efficiency variances will be more.
D)The amount of normal spoilage unfavourable efficiency variances will be unchanged.
E)The abnormal spoilage variance will be closed to cost of goods manufactured.

Question

Quizplus · Accepted Answer

When abnormal rework is distinguished from normal rework and charged to a separate loss account, the amount of normal spoilage unfavourable efficiency variances will be less. This is because the cost of abnormal rework is no longer being included in the calculation of normal spoilage, resulting in a lower overall cost of spoilage and therefore a lower unfavourable efficiency variance.

When Abnormal Rework Is Distinguished from Normal Rework, and Charged