Exam 18: Spoilage, Rework, and Scrap

IFRS/ASPE permits normal spoilage costs to be part of cost of goods sold.

Answer the following questions using the information below: Jansen Corporation uses job costing in its' metal fabrication plant.During February Job 117 was completed and the scrap generated was not usable by other jobs.Job 124 was also completed in February and the scrap created was usable by other jobs. -Which of the following is the correct journal entry if the scrap created by Job 124 is subsequently used by another job?

Bluefish Machine Shop is a manufacturer of motorized cars for golf clubs.Leona Pez, the plant manager of Bluefish, obtained the following information for Job #99 in July 2018.A total of 50 units were started, and 3 spoiled units were detected and rejected at final inspection.The spoiled units were considered to be normal spoilage.Costs prior to the inspection point are $1,200 per unit.The current disposal price of the spoiled units is $600 per unit.When spoilage is detected, the spoiled units are inventoried at $600 per unit.Required: 1.Prepare journal entries to record the normal spoilage, assuming: 2.Assume that 2 spoiled units can be reworked for a total cost of $800.A total cost of $2,400 associated with these units has already been assigned to job #99 before the rework.Prepare journal entries for the rework assuming:

Spoilage can be attributed to a particular job in a process costing system.

Answer the following questions using the information below: The following table presents the flow of production in units.Assume that there are 5,000 total spoiled units at each stage of completion and that the normal spoilage rate is 3% of good units passing the inspection point. -What is the number of abnormal spoiled units recognized at the 100% stage of completion?

When assigning costs, job-costing systems generally distinguish normal spoilage attributable to a specific job from normal spoilage common to all jobs.

Dutton Industries is a manufacturer of cleaning products.Its main product goes through two departments: Mixing and Bottling.During June, the beginning WIP in the Mixing department was 32% complete as to conversion cost.The beginning inventory included $15,200 for materials and $19,800 for conversion costs.Ending WIP in the Mixing department was 80% complete.All direct materials are added at the beginning of the process in each department.Inspection occurs at the end of the process in both departments.Normal spoilage is 2.5% of good output in Mixing and 1.4% of good output in Bottling.Beginning WIP in Bottling was 60% complete with respect to conversion costs and ending WIP was 30% converted.Beginning WIP included $8,850 for direct materials, $72,200 for transferred in costs and $23,800 for conversion costs.Additional information follows: Required: Prepare a production cost worksheet using weighted-average for the Mixing department and FIFO for the Bottling department assuming that spoilage is recognized.

Answer the following question(s)using the information below: Hawk Ltd.uses process costing in its Fabricating Department.At the beginning of October, it had 12,000 units in beginning work-in-process that were 40% complete with respect to conversion.During October it put 87,000 units into production and completed 89,000 good units.At October 31, there were 3,000 units in ending work-in-process that were 70% complete with respect to conversion.Direct materials are added at the beginning of the process.Inspection occurs at the end of the process and normal spoilage is 6% of good output.Costs related to the beginning inventory were $36,800 for direct materials and $28,600 for conversion costs.During the month, the company issued $280,000 of direct materials and incurred $599,400 of conversion costs. -Assuming Hawk uses the FIFO method of process costing, the cost of the ending work-in-process inventory is

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.

Use the information below to answer the following question(s).Craft 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 non-detectable materials defects.Inspection occurs at the end of the process.Spoiled units generally constitute 5 percent of the good units.Data for December are as follows: -The costs of abnormal spoilage are

For each of the following items identify whether it is spoilage, reworked units, or scrap. A)spoilage B)spoilage and rework -Defective jeans sold as seconds

Boss Manufacturing generally has spoiled goods during each job.Costs are assigned to normal spoilage at $10.00 per unit and abnormal spoilage at $20.00 per unit.Boss has a policy never to rework spoiled units.Management believes that once a unit is damaged it cannot be reworked into a quality product.What is the appropriate journal entry if 500 units are considered abnormal spoilage in a job costing system?

Answer the following question(s)using the information below: Hawk Ltd.uses process costing in its Fabricating Department.At the beginning of October, it had 12,000 units in beginning work-in-process that were 40% complete with respect to conversion.During October it put 87,000 units into production and completed 89,000 good units.At October 31, there were 3,000 units in ending work-in-process that were 70% complete with respect to conversion.Direct materials are added at the beginning of the process.Inspection occurs at the end of the process and normal spoilage is 6% of good output.Costs related to the beginning inventory were $36,800 for direct materials and $28,600 for conversion costs.During the month, the company issued $280,000 of direct materials and incurred $599,400 of conversion costs. -What are the normal and abnormal spoilage units, respectively, for October assuming Hawk uses the weighted average method of process costing?

Use the information below to answer the following question(s).Craft 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 non-detectable materials defects.Inspection occurs at the end of the process.Spoiled units generally constitute 5 percent of the good units.Data for December are as follows: -Normal spoilage totalled

Costs incurred due to spoilage in a job order costing system, may be treated in all of the following ways, EXCEPT

Use the information below to answer the following question(s).Waldorf Computer Systems, Inc.manufactures computer memory cards, and uses process-costing.All direct materials are added at the inception of the production process.The accounting department noted that there was no beginning inventory for January.Direct Materials purchases totalled $150,000 during the month.Work-in-process records revealed that 7,500 cards were started in January, 4,500 cards were complete, and 1,500 units were spoiled as expected.Ending work-in-process units are complete in respect to direct materials costs.Inspection occurs at the end of the process. -What is the Waldorf Computer Systems Inc.cost transferred out assuming spoilage units are not included in the equivalent unit calculation?

Answer the following questions using the information below: The following table presents the flow of production in units.Assume that there are 5,000 total spoiled units at each stage of completion and that the normal spoilage rate is 3% of good units passing the inspection point. -What is the number of normal spoiled units recognized at the 40% stage of completion?

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 37.5% of direct manufacturing labour.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.

Use the information below to answer the following question(s).Cartwright Custom Carpentry manufactures chairs in its Processing Department, and uses the FIFO cost flow assumption.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 at the end of the process, and spoiled units generally constitute 3 percent of the good output.Information provided for March is as follows: -What costs would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing?

Process costing is simplified when using standard costs.