Exam 18: Spoilage, Rework, and Scrap

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: What is the total cost per equivalent unit using the weighted-average method of process costing? (Round any cost per unit calculations to the nearest cent.)

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 3% of the good units. Data provided for February 2017 are as follows: What are the normal and abnormal spoilage units, respectively, for February when using FIFO?

For each of the following (actual real-world examples), develop products that can be sold from the listed scrap. a.The Federal Reserve Banks destroy old money. Burning this money is usually forbidden under the environmental laws of most municipalities. b.A manufacturer of cotton undergarments for prisoners has much cotton left over. The manufacturer is located in a very rural area of Alabama. c.A hog renderer has hog bristles as a result of the slaughtering process.

Costs of normal spoilage are usually accounted for as ________.

Under the FIFO method, all spoilage costs are assumed to be related to the units ________.

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: Abnormal spoilage totals ________.

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 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.)

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 55% converted. Spoiled units generally constitute 5% of the good units. Data for December 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.)

Costs in beginning inventory are pooled with costs in the current period when determining the costs of good units under the weighted-average method of process costing.

The standard-costing method ________.

Costs are assigned to scrap only if it is abnormal scrap.

When the amount of scrap is immaterial, which of the following is the easiest accounting entry when recording scrap sold for cash?

When normal spoilage is common to all jobs, the budgeted manufacturing overhead rate includes a provision for the normal spoilage cost.

Which of the following is a journal entry to recognize the disposal value?

The Duolane Pottery manufactures pottery products. All direct materials are included at the inception of the production process. For April, there was no beginning inventory in the processing plant. Direct materials totaled $180,000 for the month. Work-in-process records revealed that 3,000 tons were started in April and that 2,100 tons were finished; 500 tons were spoiled as expected. Ending work-in-process units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. Required: a.What is the cost per equivalent unit? b.What are the costs assigned to completed units? c.What are the costs transferred out? d.What are the amounts allocated to the work-in-process ending inventory?

In general, it is presumed that normal spoilage occurs halfway between the beginning of the production process and the inspection point in the production cycle. This is because there is no easy way to determine where the spoilage has happened until the inspection has occurred.

The Peric Manufacturing Shop produces motorcycle parts. Typically, 17 pieces out of a job lot of 1200 parts are spoiled. Costs are assigned at the inspection point, $60.00 per unit. Spoiled pieces may be disposed at $8.00 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 would be correct if the spoilage occurred due to specifications required for Job 101?

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 45% converted. Spoiled fillets generally constitute 6% of the good fillets. Data for April 2017 are as follows: What is the total cost per equivalent unit using the weighted-average method of process costing? (Round any cost per unit calculations to the nearest cent.)

When the dollar amount of scrap is immaterial, the simplest accounting is to record the physical quantity of scrap returned to the storeroom and to regard scrap sales as a separate line item in the income statement.

Shazam Machines produces numerous types of money change machines. All machines are made in the same production department and many use exactly the same processes. Because customers have such different demands for the machine characteristics, the company uses a job-costing system. Unfortunately, some of the production managers have been upset for the last few months when their jobs were charged with the spoilage that occurred over an entire processing run of several types of machines. Some of the best managers have even threatened to quit unless the accounting system is changed. Required: What recommendations can you suggest to improve the accounting for spoilage?