Costing - Study Mode
[#101] Residual material which results from manufacturing products is called
Correct Answer
(D) scrap
Explanation
Solution: Residual material which results from manufacturing products is called scrap. Scrap is residual material that results from manufacturing a product.
[#102] Costing, which explains how and when scrap affects operating income of company is classified as
Correct Answer
(A) inventory costing
Explanation
Solution: Costing, which explains how and when scrap affects operating income of company is classified as inventory costing. Inventory is merchandise purchased by merchandisers (retailers, wholesalers, distributors) for the purpose of being sold to customers. The cost of the merchandise purchased but not yet sold is reported in the account Inventory or Merchandise Inventory.
[#103] An amount of spoilage that is natural in any particular production process is classified as
Correct Answer
(B) normal spoilage
Explanation
Solution: An amount of spoilage that is natural in any particular production process is classified as normal spoilage. Normal spoilage refers to the inherent worsening of products during the production or inventory processes of the sales cycle.
[#104] Cost of abnormal spoilage is not treated as
Correct Answer
(D) non inventoriable costs
Explanation
Solution: Cost of abnormal spoilage is not treated as non inventoriable costs. Non-inventoriable cost are costs that are not included in the value of inventory, also known as non-manufacturing overhead. It includes Selling, General and Administrative expenses, and Interest expense.
[#105] If units of normal spoilage are 150 and total good units manufactured are 1500, then normal spoilage rate would be
Correct Answer
(C) 10.00%
Explanation
Solution: If units of normal spoilage are 150 and total good units manufactured are 1500, then normal spoilage rate would be 10.00%. Normal spoilage% = Normal spoilage / Total unit × 100 = 150/1500 × 100 = 10%.