Exam 10: Understanding Insurance

A term for a variety of types of loss of inventory, including theft, spoilage, and other unexplained factors that reduce the inventory is

Under GAAP, costs of manufacturing products are considered part of inventory until the items are sold or disposed of.

A cheese-making factory buys milk, and turns the milk into two major products: cheese and butter. Here are some facts regarding its production during the year: Pounds of cheese produced 3,000,000 Pounds of butter produced 3,000,000 Selling price per pound of butter $2 Selling price per pound of cheese $3 Joint costs of making the butter and the cheese $14,000,000

In general, if we compare the traditional full absorption method with ABC, the traditional full absorption method will tend to assign less costs to simple, high-volume products, and less costs to complicated, low-volume products.