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Question

A company manufactures goods with normal loss of 5%. In one batch, due to worker negligence, loss rose to 12%. At what level should inventory be valued?

A Absorb all losses into inventory cost.

B Charge excess abnormal loss to P&L, only normal loss to inventory.

C Ignore losses since production is still viable.

D Capitalize abnormal losses as deferred expense.

E Value at replacement cost.

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