Exam 18: Spoilage, Rework, and Scrap

For each of the following items identify whether it is spoilage, reworked units, or scrap. A)spoilage B)spoilage and rework -Precision tools that are not built successfully to the necessary tolerance, but which can be successfully converted to a saleable product

The Skate Board Company uses a process cost system for making skateboard wheels.Materials are added at the beginning of the process and conversion costs are uniformly incurred.At the beginning of September the work-in-process is 40 percent complete and at the end of the month it is 60 percent complete.Spoilage is detected at the end of the process.Other data for the month include: Beginning work-in-process costs: Required: a.Prepare a production cost worksheet assuming that spoilage is recognized and the FIFO method is used. b.Prepare journal entries to record transferring out of cost from the work-in-process accounts.

Marble Shop manufactures marble 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 totalled $420,000 for the month.Work-in-process records revealed that 7,500 tonnes were started in April and that 5,500 tonnes were finished; 500 tonnes 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 are the costs assigned to completed units when spoilage units are recognized and when they are not recognized in the cost per equivalent unit? b.What are the costs transferred out if spoilage units are recognized and if they are ignored? c.What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized and when spoilage units are ignored?

For each of the following items identify whether it is spoilage, reworked units, or scrap.

New Image Sports uses a process costing system.Direct materials are placed into production at the beginning of the process.All spoilage is normal and is detected at the end of the process.For March the company had the following activities: Required: Prepare a production cost worksheet assuming that spoilage is recognized and the FIFO method is used.

Abnormal spoilage is spoilage that should arise under efficient operating conditions.

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: -Under the FIFO method, all spoilage costs are assumed to be

Reworked goods are unacceptable units of production usually not capable of being repaired or converted into a salable product.

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 equivalent units for direct materials and conversion costs respectively for October are

A company whose goal is zero defects would usually treat all spoilage as abnormal.

In job costing, costs of abnormal spoilage are not considered as inventoriable costs and are therefore written off as costs of the period in which detection occurs.

If scrap, common to all jobs, is returned to the storeroom and the time between the scrap being inventoried and its disposal is quite lengthy, the journal entry is:

Units of production that can be reprocessed and then be sold as finished goods are best known as

The standard-costing method

The Joe's 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 $155,000 for the month.Work-in-process records revealed that 2,500 tons were started in April and that 1,500 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 are the costs assigned to completed units when spoilage units are recognized and when they are not recognized in the cost per equivalent unit? b.What are the costs transferred out if spoilage units are recognized and if they are ignored? c.What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized and when spoilage units are ignored?

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 are allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively?

Spoilage issues arise in accounting for process costing but not in accounting for job costing.

Which account is debited when scrap is reused as direct material?

A company manufactures draperies.Because of strict production specifications, the manufacturing department often has spoiled items.If the spoiled items are under 10 percent of a job's total items they are treated as normal spoilage.During February job #101 for 200 draperies had 16 spoiled items.The spoiled items were detected immediately before they were packaged.They had already passed the safety inspection.The marketing manager believes the items can be sold for $280 each.They had a cost at point of detection of $600 each.These costs included $300 for direct manufacturing labour, $200 for direct materials, and $100 for factory overhead.Required: a.Make the necessary journal entry, or entries, to record the spoiled units if the spoilage is normal and assigned to an overhead control account. b.Make the necessary journal entry, or entries, to record the spoiled units if the spoilage is assigned to job #101.

Boutin Company uses a job costing system.During October, the following costs are incurred on Job 110 to manufacture 200 motors: Original costs: Manufacturing overhead allocated Direct cost of reworking 10 motors: Required: a.Prepare the journal entry to record the rework costs, assuming the rework is attributable specifically to Job 110. b.Compute the cost per finished motor for Job 110, assuming the rework is attributable specifically to this job. c.Prepare the journal entry to record the rework costs, assuming the rework is common to all jobs. d.Compute the cost per finished motor for Job 110, assuming the rework is common to all jobs.