Trout Company manufactures a single product. During the manufacturing process, a small number of units do not pass final inspection and are destroyed. What is the appropriate accounting treatment for the cost of these units? The cost should be

Answer (A) is correct. Output that does not meet the quality for salability is considered spoilage. The numbers that do not pass final inspection but that are considered acceptable as a part of efficient production are considered normal spoilage. The accounting treatment is to include normal spoilage as a product cost.