Final answer:
The cost of normal spoilage is added to the cost of good units produced, as it's considered part of the manufacturing process and included in the inventory valuation until sold, and then accounted for in the cost of goods sold.
Step-by-step explanation:
If spoilage is normal (expected), the cost of spoiled units is typically allocated to the cost of good units produced. This means that the cost of the normal spoilage is spread over the cost of units that are completed and sold, effectively increasing the cost of goods sold. This is done because normal spoilage is considered to be a regular part of the production process and its cost is an inherent part of producing the good units.
In the accounting sense, normal spoilage costs are absorbed into the cost of the products which means the answer choice is (a) added to the cost of good units produced. Therefore, these costs are considered part of the cost of manufacturing and are included in the inventory valuation on the balance sheet until the goods are sold and then recognized as part of the cost of goods sold on the income statement. It is not credited directly to the profit and loss account, assigned to a separate spoilage loss account, or recorded as a liability.