In a process costing system the cost of abnormal spoilage should be:
A) prorated between units transferred out and ending inventory.
B) included in the cost of units transferred out.
C) treated as a loss in the period incurred.
D) ignored.

Question

Quizplus · Accepted Answer

Abnormal spoilage is not a normal part of the production process, so its cost should be treated as a loss in the period it occurs. It should not be included in the cost of units transferred out or prorated between units transferred out and ending inventory. Ignoring the cost of abnormal spoilage would result in distorted product costs and inaccurate decision-making.

In a Process Costing System the Cost of Abnormal Spoilage