You are employed as cost accountant in a company in which the process cost accounting method is used. The financial vice president is concerned because about 5 percent of the units brought into the Finishing Department are lost in the production process and you have been ignoring these units in your computation of equivalent units; as a result, the costs of these units are absorbed by the good units. She would prefer to remove the costs of the lost units from Work in Process—Finishing Department and charge them to Cost of Goods Sold. What arguments can you make against her suggestion?

LO.1