Question 2 - of each spoiled unit. This cost of the spoiled...

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Question #2 If normal spoilage is generally anticipated to occur on all jobs, how should the cost of that spoilage be treated? Hi Professor and class, The cost of spoilage is treated as a cost of manufacturing the good units. There are two methods that can be used to account for the cost of normal spoilage. The first is to absorb the cost of the spoilage into the cost of the good units, while not identifying it specifically as spoilage cost. The second method is to separately identify the total cost of the spoiled units, thereby reporting the amount by which the cost of the good units was increased by the cost of the spoilage. If using the second method, where the cost of spoilage is separately identified, you must compute the cost
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Unformatted text preview: of each spoiled unit. This cost of the spoiled unit is the cost to process that unit up to the point in production where the spoilage occurred or was identified. Then, the total cost of the spoiled units is the cost of one spoiled unit multiplied by the number of units spoiled. In some cases, spoiled units are not totally worthless. Although the units are not good enough to meet the quality requirements, they may be able to be sold, even if at a bargain price. The revenue generated from these sales can offset, or even eliminate, the loss from spoilage. Jack Cost Accounting. Foundation and Evolutions. Michael R. Kinney and Cecily A. Raiborn...
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