Exam 18: Spoilage, Rework, and Scrap

Robotoys Incorporated manufactures and distributes small robotic toys. Because most of its orders are via telephone or fax, numerous orders have to be reworked. The average cost of the reworked orders is $11.30: $4.15 for labor, $5.00 for more materials, and $2.15 for overhead. This ratio of costs holds for the average original order. On a recent day, the shop reworked 83 orders out of 700. The original cost of the 83 orders totaled $1,909. The average cost of all orders is $24.34, including rework, with an average selling price of $34.50. Required: Prepare the necessary journal entry to record the rework for the day if the shop charges such activities to Robo Department Overhead Control. Prepare journal entries to record all relevant rework charges as well as to transfer the reworked items finished goods to Finished Goods Inventory.

Answer the following questions using the information below: Cartwright 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 nondetectible material defects. Spoiled units generally constitute 3% of the good units. Data provided for March 20X5 are as follows: Costs: -What are the normal and abnormal spoilage units, respectively, for March when using FIFO?

Answer the following questions using the information below: Triboro Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $200,000 during the month. Work-in-process records revealed that 8,000 card units were started in January, 4,000 card units were complete, and 3,000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. -What are the respective direct material costs per equivalent unit, assuming spoiled units are recognized or ignored?

Answer the following questions using the information below: Triboro Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $200,000 during the month. Work-in-process records revealed that 8,000 card units were started in January, 4,000 card units were complete, and 3,000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. -What are the amounts allocated to the work-in-process ending inventory assuming spoilage units are recognized and ignored, respectively?

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 is the cost per equivalent unit if spoiled units are recognized or ignored? b. What are the costs assigned to completed units when spoilage units are recognized or when they are not recognized? c. What are the costs transferred out if spoilage units are recognized or ignored? d. What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized or ignored?

Scrap and rework are considered to be the same thing by managerial accountants.

Material left over when making a product is referred to as:

Answer the following questions using the information below: 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 nondetectible defects. Inspection occurs when units are 50% converted. Spoiled fillets generally constitute 3.5% of the good fillets. Data for April 2012 are as follows: Costs for April: -Normal spoilage totals:

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

When normal spoilage occurs because of the specifications of a particular job, that job bears the cost of the spoilage minus the disposal value of the spoilage.

Which of the following entries reflects the original cost assignment before production items are reworked?

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

When spoiled goods have a disposal value, the net cost of the spoilage is computed by:

The Harleysville Manufacturing Shop produces motorcycle parts. Typically, 10 pieces out of a job lot of 1,000 parts are spoiled. Costs are assigned at the inspection point, $50.00 per unit. Spoiled pieces may be disposed at $10.00 per unit. The spoiled goods must be inventoried appropriately when the normal spoilage is detected. The current job requires the production of 2,500 good parts. Which of the following journal entries properly reflects the recording of spoiled goods?

Identify the appropriate order of the following steps in the procedure for process costing with spoilage. a. summarize total costs to account for b. assign total costs to units completed, to spoiled units, and to units in ending inventory c. summarize the flow of physical units d. compute output in terms of equivalent units e. compute cost per equivalent unit Step 2 ________

Costs of poor quality production include the:

Which one of the following conditions usually exists when comparing normal and abnormal spoilage to controllability?

Weather Instruments assembles products from component parts. It has two departments that process all products. During January, the beginning work in process in the assembly department was half complete as to conversion and complete as to direct materials. The beginning inventory included $12,000 for materials and $4,000 for conversion costs. Overhead is applied at the rate of 50% of direct manufacturing labor costs. Ending work-in-process inventory in the assembly department was 40% complete. All spoilage is considered normal and is detected at the end of the process. Beginning work in process in the finishing department was 75% complete as to conversion and ending work in process was 25% converted. Direct materials are added at the end of the process. Beginning inventories included $16,000 for transferred-in costs and $10,000 for direct manufacturing labor costs. Overhead in this department is equal to direct manufacturing labor costs. Additional information about the two departments follows: Required: Prepare a production cost worksheet using weighted-average for the assembly department and FIFO for the finishing department.

Answer the following questions using the information below: 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 nondetectible defects. Inspection occurs when units are 50% converted. Spoiled fillets generally constitute 3.5% of the good fillets. Data for April 2012 are as follows: Costs for April: -Under the FIFO method, all spoilage costs are assumed to be related to the units:

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: