During the production of its single product, a company discovers that an unusual overnight power failure ruined an entire day’s in-process production. How should the cost of these spoiled units be charged?

Answer (B) is correct. Abnormal spoilage is not expected to occur under normal, efficient operating conditions. The cost of abnormal spoilage should be separately identified and reported to management. Abnormal spoilage is typically treated as a period cost and written off as a loss because of its unusual nature.