Question 1

What is the advantage and disadvantage of early inspections?

Accepted Answer

Early inspections can help prevent any further costs being wasted on units that are already
spoiled. But conducting inspections at too early stages can result in instances of spoiled units may go undetected at later stages of the process.

Question 2

Which of the following entries is correct when the costs of the rework is normal and common to all the jobs?

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)   A

Question 3

Abnormal spoilage is spoilage inherent in a particular production process.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point?

Accepted Answer

A)  Unit cost of normal spoilage is more than unit cost of abnormal spoilage. 
B)  Unit cost of normal spoilage is equal to unit cost of abnormal spoilage. 
C)  Unit cost of abnormal spoilage is more than unit cost of normal spoilage. 
D)  Addition of unit cost of normal spoilage and unit cost of abnormal spoilage is equal to unit cost of good units produced and transferred. 
A)  Unit cost of normal spoilage is more than unit cost of abnormal spoilage. 
B)  Unit cost of normal spoilage is equal to unit cost of abnormal spoilage. 
C)  Unit cost of abnormal spoilage is more than unit cost of normal spoilage. 
D)  Addition of unit cost of normal spoilage and unit cost of abnormal spoilage is equal to unit cost of good units produced and transferred.

Question 5

Scrap and rework are considered to be the same thing by managerial accountants.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is an example of scrap?

Accepted Answer

A)  short lengths from woodworking operations that must be discarded 
B)  defective units of laptops detected after the production process but reworked before the units are sold as good products to customers 
C)  defective aluminum cans sold to aluminum manufacturers for remelting to produce other aluminum products 
D)  defective shirts, jeans, shoes, and carpeting sold as seconds 
A)  short lengths from woodworking operations that must be discarded 
B)  defective units of laptops detected after the production process but reworked before the units are sold as good products to customers 
C)  defective aluminum cans sold to aluminum manufacturers for remelting to produce other aluminum products 
D)  defective shirts, jeans, shoes, and carpeting sold as seconds

Question 7

Outose Concept manufactures small tables in its Processing Department. Direct materials are added at the initiation of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some units are spoiled due to undetectable materials defects. Spoiled units generally constitute 5% of the good units. Data for December 2017 are as follows:
 
What cost is allocated to abnormal spoilage using the weighted-average process-costing method? (Round any cost per unit calculations to the nearest cent.)

Accepted Answer

A)  $ 0 
B)  $28,150 
C)  $25,177 
D)  $77,200 
A)  $ 0 
B)  $28,150 
C)  $25,177 
D)  $77,200

Question 8

If a company set a standard of zero rework ________.

Accepted Answer

A)  all rework is treated as abnormal and is written off as a cost of the current period 
B)  all rework is treated as normal and is written off as a cost of the current period 
C)  all rework is treated as abnormal and is shown as a liability of the current period 
D)  all rework is treated as normal and is shown as a liability of the current period 
A)  all rework is treated as abnormal and is written off as a cost of the current period 
B)  all rework is treated as normal and is written off as a cost of the current period 
C)  all rework is treated as abnormal and is shown as a liability of the current period 
D)  all rework is treated as normal and is shown as a liability of the current period

Question 9

How can a company account for scrap? Include in your explanation a discussion of the two aspects of accounting for scrap.

Accepted Answer

Since scrap is a residual material that

Question 10

When spoiled goods have a disposal value, the net cost of the spoilage is computed by ________.

Accepted Answer

A)  deducting disposal value from the costs of the spoiled goods accumulated to the inspection point 
B)  adding the costs to complete a saleable product to the costs accumulated to the inspection point 
C)  deducting the costs to complete a saleable product from the costs accumulated to the inspection point 
D)  adding disposal value to the costs of the good units transferred 
A)  deducting disposal value from the costs of the spoiled goods accumulated to the inspection point 
B)  adding the costs to complete a saleable product to the costs accumulated to the inspection point 
C)  deducting the costs to complete a saleable product from the costs accumulated to the inspection point 
D)  adding disposal value to the costs of the good units transferred

Question 11

When a unit has to be reworked, the rework may be classified in three ways. What are those ways, and how does the accounting for each differ?

Accepted Answer

The rework may be (1) normal rework attr

Question 12

The Peric Manufacturing Shop produces motorcycle parts. Typically, 22 pieces out of a job lot of 1800 parts are spoiled. Spoilage is considered a normal part of Peric's production process. Costs are assigned at the inspection point, $52.00 per unit. Spoiled pieces may be disposed at $16.00 per unit. The spoiled goods must be inventoried appropriately when the normal spoilage is detected. The current job requires the production of 3600 good parts.
Which of the following journal entries properly reflects the recording of spoiled goods?

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 13

Outose Concept manufactures small tables in its Processing Department. Direct materials are added at the initiation of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some units are spoiled due to undetectable materials defects. Spoiled units generally constitute 3% of the good units. Data for December 2017 are as follows:
 
Abnormal spoilage totals ________.

Accepted Answer

A)  2430 units 
B)  8100 units 
C)  5913 units 
D)  2187 units 
A)  2430 units 
B)  8100 units 
C)  5913 units 
D)  2187 units

Question 14

Which of the following is true of the calculation of the cost per good unit (a unit that is completed and transferred out) under the weighted-average process costing method?

Accepted Answer

A)  the equivalent units in the denominator include goods completed and transferred out and all units that were spoiled 
B)  the numerator only includes the materials and conversion costs of good units and excludes the costs of spoiled units 
C)  the equivalent units in the denominator include goods completed and transferred out and excludes the units that were spoiled 
D)  the calculation is total costs transferred out divided by the good units that were transferred out 
A)  the equivalent units in the denominator include goods completed and transferred out and all units that were spoiled 
B)  the numerator only includes the materials and conversion costs of good units and excludes the costs of spoiled units 
C)  the equivalent units in the denominator include goods completed and transferred out and excludes the units that were spoiled 
D)  the calculation is total costs transferred out divided by the good units that were transferred out

Question 15

Colil Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials of $301,000 were used in production during the month. Work-in-process records revealed that 12,000 card units were started in January, 6000 card units were complete, and 4000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.
What is the direct material cost assigned to good units completed? (Please round interim calculations to the nearest cent, and final calculations to the nearest whole dollar.)

Accepted Answer

A)  $150,480 
B)  $258,000 
C)  $100,320 
D)  $250,800 
A)  $150,480 
B)  $258,000 
C)  $100,320 
D)  $250,800

Question 16

Maxire Shoes manufactures shoes. All direct materials are included at the inception of the production process. For March, there were 2,800 units in beginning inventory with a direct material cost of $1,400. Direct materials totaled $35,000 for the month. Work-in-process records revealed that 70,000 units were started in March and that 60,000 were finished. When March ended there were 12,800 units in work-in-process. Normal spoilage of 2% of units finished was incurred. Ending work-in-process units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. Endicott uses the weighted-average method.
Required:
a.What are the direct materials costs assigned to completed good units?
b.What are the direct material amounts allocated to the work-in-process ending inventory?

Accepted Answer

The answer of Maxire Shoes manufactures shoes. All direct materials...

Question 17

If scrap is returned to the company's storeroom and inventoried, it should NOT have any value in the accounting records.

Accepted Answer

A) True 
 B)False

Question 18

Verer Custom Carpentry manufactures chairs in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to undetectable material defects. Spoiled units generally constitute 5% of the good units. Data provided for March 2017 are as follows:
 
What costs are allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively, using the FIFO method of process costing? (Round any cost per unit calculations to the nearest cent.)

Accepted Answer

A)  $64,676; $40,067 
B)  $28,237; $24,740 
C)  $28,352; $25,353 
D)  $28,019; $15,091 
A)  $64,676; $40,067 
B)  $28,237; $24,740 
C)  $28,352; $25,353 
D)  $28,019; $15,091

Question 19

What are the objectives in accounting for spoilage?

Accepted Answer

The key objectives in accounting for spo

Question 20

Spoilage is typically assumed to occur at the stage of completion where inspection takes place.

Accepted Answer

A) True 
 B)False

What is the advantage and disadvantage of early inspections?

Which of the following entries is correct when the costs of the rework is normal and common to all the jobs?

Abnormal spoilage is spoilage inherent in a particular production process.

Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point?

Scrap and rework are considered to be the same thing by managerial accountants.

Which of the following is an example of scrap?

If a company set a standard of zero rework ________.

How can a company account for scrap? Include in your explanation a discussion of the two aspects of accounting for scrap.

When spoiled goods have a disposal value, the net cost of the spoilage is computed by ________.

When a unit has to be reworked, the rework may be classified in three ways. What are those ways, and how does the accounting for each differ?

Which of the following is true of the calculation of the cost per good unit (a unit that is completed and transferred out) under the weighted-average process costing method?

If scrap is returned to the company's storeroom and inventoried, it should NOT have any value in the accounting records.

What are the objectives in accounting for spoilage?

Spoilage is typically assumed to occur at the stage of completion where inspection takes place.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 18: Spoilage, Rework, and Scrap

What is the advantage and disadvantage of early inspections?

Which of the following entries is correct when the costs of the rework is normal and common to all the jobs?

Abnormal spoilage is spoilage inherent in a particular production process.

Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point?

Scrap and rework are considered to be the same thing by managerial accountants.

Which of the following is an example of scrap?

If a company set a standard of zero rework ________.

How can a company account for scrap? Include in your explanation a discussion of the two aspects of accounting for scrap.

When spoiled goods have a disposal value, the net cost of the spoilage is computed by ________.

When a unit has to be reworked, the rework may be classified in three ways. What are those ways, and how does the accounting for each differ?

Which of the following is true of the calculation of the cost per good unit (a unit that is completed and transferred out) under the weighted-average process costing method?

If scrap is returned to the company's storeroom and inventoried, it should NOT have any value in the accounting records.

What are the objectives in accounting for spoilage?

Spoilage is typically assumed to occur at the stage of completion where inspection takes place.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters