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Darden Manufacturing, a calendar-year corporation, had $17,000 of spoilage during April that production management characterized as abnormal.

The spoilage was incurred on Job No.532, which was sold3 months later for $459,000. Which of the following correctly describes the impact of the spoilage on Darden's unit manufacturing cost for Job No.532 and on the year's operating income?

 

>>>>>>>>Unit Manufacturing Cost - OperatingIncome.

A.  >>>>>>>>>> Increase - No effect

B. >>>>>>>>>> Increase - Decrease

C. >>>>>>>>>> No effect - Decrease

D. >>>>>>>>>> No effect - Not enough information to judge

Accounting Auditing Cost Accounting Financial Accounting Internal Audit
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Question added by Hany Sabry , Finance Manager , GMC for Engineering & Feeding Industries (S.A.E)
Date Posted: 2015/01/25
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Ezzidin Ibrahim
by Ezzidin Ibrahim , Financial Controller , Karim Food Industries

C- The unit cost should not be changed, the operating income will be decreased since all the abnormal costs will be treated as period cost.

Muhammad Waqas
by Muhammad Waqas , Manager , Pwc - Pakistan

B. >>>>>>>>>> Increase - Decrease

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