Question

During June 20, 2012, AB Company. had the following data: Normal spoilage $2,000 and abnormal spoilage $1,000. The normal spoilage is regarded as common to all operations. AB Company has only one production Department.

Assuming process costing system, the abnormal spoilage should be charged to =
Assuming Job Order Costing system, the normal spoilage should be charged to =
Assuming process costing system, the normal spoilage should be charged to Abnormal spoilage =

A. Normal spoilage less abnormal spoilage

B. Work in Process Control

C. Finished goods

D. Loss from Abnormal Spoilage (Special Loss Account)

E. Manufacturing Overhead (Specific Job)

F. Loss from Normal Spoilage (Special Loss Account)

G. Normal spoilage and abnormal spoilage

H. Total spoilage less normal spoilage

I. Direct material inventory

J. Manufacturing Overhead Contro

Answer 1

Solution:

Assuming process costing system, the abnormal spoilage should be charged to =	D. Loss from Abnormal Spoilage (Special Loss Account) (The spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions is called Abnormal Spoilage. It is avoidable and controllable. Abnormal spoilages are recorded in the Loss from Abnormal Spoilage account which appears as a separate line on income statement.)
Assuming Job Order Costing system, the normal spoilage should be charged to =	C. Finished goods (When normal spoilage occurs for specific job, that job bears the cost of the normal spoilage less the disposal value of the spoilage. Job is considered as finished goods.)
Assuming process costing system, the normal spoilage should be charged to Abnormal spoilage =	C. Finished goods

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you