Exam 18: Spoilage, Rework, and Scrap

Samantha's Office Supplies manufactures desk organizers 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 4% of the good units. Data provided for February 2017 are as follows: What is the total costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped? Take into account the costs related to the completion of the conversion of the units during the month. Use the FIFO method of process costing. (Round any cost per unit calculations to the nearest cent.)

When spoiled goods have a disposal value, the net cost of spoilage is computed by adding the disposal value to the costs of the spoiled goods accumulated to the inspection point.

Spoilage can be considered either normal or abnormal.

All accounting systems must assume that the inspection point occurs when a process is 100% complete.

Harriet has been reviewing the accounting system for her company and she is very concerned about the accounting for spoilage. It appears that spoilage is accounted for only at the end of the processing cycle. While this concept is acceptable in general, Harriet believes that a better method can be found to properly account for the spoilage when it occurs. She believes that there must be something better than the weighted-average method of accounting for spoilage. She would like the company to use a method that provides closer tracking of the spoilage with the accounting for the spoilage. Required: Discuss the problems Harriet is having with the accounting system.

Normal spoilage is computed on the basis of the number of ________.

In accounting for scrap, which of the following statements is true?

Spoilage that is an inherent result of the particular production process and arises even under efficient operating conditions is referred to as ________.

Assume the following: WIP, beginning 4500 units (100% complete as to direct materials, 40% complete as to conversion costs) Started 12,500 units during the period Total spoilage is 800 with normal spoilage is calculated to be 350 units Completed and transferred out during the period 10,000 units WIP, ending 6200 units (100% complete as to direct materials, 50% complete as to conversion costs) Spoiled units 800 and inspection happens when the process is 30% complete All materials are added at the start of the process Under the weighted average method, would would be the equivalent units of work done for the period?

The unit costs of normal and abnormal spoilage are the same when the two are detected at the same inspection point.

Samantha's Office Supplies manufactures desk organizers 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 February 2017 are as follows: What are the total costs of all the units that were started during February and subsequently shipped before the end of the period? (Round any cost per unit calculations to the nearest cent.)

Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some fillets are spoiled due to undetectable defects. Spoiled fillets generally constitute 4% of the good fillets. Data for April 2017 are as follows: What is the amount of direct materials and conversion costs assigned to ending work in process using the weighted-average process-costing method? (Round any cost per unit calculations to the nearest cent.)

Silver Spoon Incorporated is a manufacturer of kitchen utensils. It produces all of its products in one department. The information for the current month is as follows: Beginning work in process was 25% complete as to conversion. Direct materials are added at the beginning of the process. Factory overhead is applied at a rate equal to 40% of direct manufacturing labor. Ending work in process was 60% complete. All spoilage is normal and is detected at the end of the process. Required: Prepare a production cost worksheet if spoilage is recognized and the weighted-average method is used.

Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit.

Which of the following sentences is true of classification of spoilage as normal or abnormal when inventories are present?

Companies calculate the units of abnormal spoilage and record the cost in the Loss from Abnormal Spoilage account, which appears as a separate line item in an income statement.

If scrap is reused as direct material rather than sold as scrap, which of the following would be the proper account?

Normal spoilage rates are computed by dividing units of normal spoilage by total good units completed, NOT total actual units started in production.

Which of the following defines spoilage?

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. Inspection occurs when units are 60% converted. Spoiled units generally constitute 6% of the good units. Data for December 2017 are as follows: What is the number of total spoiled units?