In its April Year 1 production, Hern Corp., which does not use a standard cost system, incurred total production costs of $900,000, of which Hern attributed $60,000 to normal spoilage and $30,000 to abnormal spoilage.

 In its April Year 1 production, Hern Corp., which does not use a standard cost system, incurred total production costs of $900,000, of which Hern attributed $60,000 to normal spoilage and $30,000 to abnormal spoilage.

Hern should account for this spoilage as

Period cost of $90,000.
Inventoriable cost of $90,000.
Period cost of $60,000 and inventoriable cost of $30,000.
Inventoriable cost of $60,000 and period cost of $30,000.

 
 You Answered Correctly!
The distinction between normal and abnormal spoilage is that normal spoilage is an expected part of the production process. The cost represents units or materials that were lost in the normal production process. They are indirect manufacturing costs (overhead) and, thus, are inventoriable. Abnormal spoilage is unexpected, and is over and above the anticipated level. It represents a loss for financial accounting purposes. No benefit is derived from abnormal spoilage.