Exam 18: Spoilage, Rework, and Scrap

Normal spoilage is usually regarded as avoidable and controllable.

Under standard costing, there is no need to calculate a cost per equivalent unit.

Which of the following statements is true of normal spoilage and abnormal spoilage?

Explain the meaning of the terms spoilage, scrap, and rework. Provide an example of each. Is it possible for a single firm to have all three from a single productive process?

Spoilage can be a significant cost for many organizations. Discuss when spoilage might happen and how the costs of normal spoilage get allocated.

Scrap is residual material that results from manufacturing a product; it has low total sales value compared with the total sales value of the product.

Some amounts of spoilage, rework, or scrap are inherent in many production processes.

The loss from abnormal spoilage account would appear ________.

Line operators and other plant personnel generally can decrease or eliminate normal spoilage by identifying the reasons for machine breakdowns, operator errors.

The last step in the five-step procedure for process costing with spoilage is to summarize total costs to account for.

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. Inspection occurs when units are 40% converted. Spoiled fillets generally constitute 6% of the good fillets. Data for April 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.)

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 5% of the good fillets. Data for April 2017 are as follows: Normal spoilage totals ________.

Spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions is referred to as ________.

Which of the following sentences is true of normal spoilage and abnormal spoilage?

Companies that attempt to achieve zero defects in the manufacturing process treat spoilage as ________.

Excluding spoiled units in the equivalent-unit calculation results in ________.

Busy Hands Craft Company is a small manufacturing company that specializes in arts and crafts items. It recently bought an old textile mill that it has refurbished to manufacture and dye special cloth to be sold in its craft shops. However, it discovered something new for its accounting system. The company never before had finished goods that did not meet standard, leftover materials from processing runs, or unacceptable outputs. Required: As the business consultant for the company, explain how it can handle the items mentioned. Include any potential problems with the accounting procedures.

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 4% of the good units. Data provided for March 2017 are as follows: What costs would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing? (Round any cost per unit calculations to the nearest cent.)

Why do firms often conduct multiple inspections?

For each of the following items identify whether it is spoilage, reworked units, or scrap. ________a.Defective shirts sold as seconds ________b.End cuts from suit-making operations that are discarded ________c.Edges from plastic moldings that is a low value byproduct ________d.Carpets sold as seconds in a factory outlet at a deep discount ________e.Precision tools that are not built successfully to the necessary tolerance, but which can be successfully converted to a saleable product ________f.Rock extracted as a result of mining processing ________g.Complex defective products such as semiconductors