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In many industries that have a process manufacturing operation, the production process is of a nature that some units will always be lost due to evaporation, shrinkage, spillage, or other factors. These normal losses: are treated as period costs. B. Are absorbed by good units. Are charged to a separate Loss from Normal Spoilage account. D. Are 100% avoidable costs. Status: incorrect (0. 0) correct: b your answer: c feedback: Incorrect. Normal losses are expected in the manufacturing process and cannot be avoided.
They are treated as product costs; that is, the cost of the lost units is included as a part of the cost of all units finished or still in process because the good units could not have been produced without this normal spoilage. 2 An abnormal loss: is treated as a period cost. Is included as part Of the cost Of transferred goods. Results in higher unit cost of the remaining units. Happens under normal, efficient operating conditions. Correct: a your answer: b feedback: Incorrect.
Abnormal losses are not included as part of the cost of transferred or finished goods, but are treated as a period cost-that is, they are charged to a separate account such as Loss from Abnormal Spoilage. Which Of the following is the most commonly used method for assignment Of joint costs? Average production cost Split-off method Relative sales value Relative percentage of direct costs basis correct: c feedback: Incorrect. The assignment of joint costs in proportion to the relative sales value of each product is most commonly used. In which scenario would an adjusted sales value be used to assign costs? If a joint product is to be processed further after the point of separation. If joint products are separately identifiable before split-off point If abnormal losses occur during production of joint products. If one of the joint products has negligible market value. Feedback: Incorrect. If a product is to be processed further after the point of separation, costs should not be assigned on the basis of ultimate sales value because the additional processing adds value to the product.