Exam 18: Spoilage, rework, and Scrap

Wilson Sports uses a process costing system.Direct material A is placed into production at the beginning of the process,while direct material B is placed into production at the end of the process.Inspection occurs at the end of the process,before the addition of direct material B.Normal spoilage is 5% of good units.For March the company had the following activities: Required: Prepare a production cost worksheet assuming that spoilage is recognized and the weighted-average method is used.

Items with minimal sales value are known as

Answer the following question(s)using the information below. Samantha's Office Supplies manufactures desk organizers in its Processing Department.Direct materials are added at the beginning of the process and conversion costs are incurred evenly throughout the production cycle.Inspection takes place at the end of the process and spoiled units generally constitute 4% of the good units.Data provided for February 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?

Which of the following is NOT a consideration when accounting for scrap?

If normal spoilage is presumed to occur prior to a specific inspection point,and abnormal spoilage is detected at other inspection points

Dad's Bottling Company often has bottles that do not meet customer specifications although it does not allow for spoilage.Some of the rejects are immediately crushed and recycled while others are held for future use in other jobs.During May the company had bottles costing $1,000 that were recycled and $1,600 worth of bottles that were placed into finished goods inventory for later sale;these bottles were sold in June for $2,000. Required: Record the journal entries associated with the above activities.Assume saleable scrap items are returned to inventory when rejected during inspection.

Distinguish among spoilage,reworked units,and scrap.Give an example of each.

A company manufactures leather jackets.Because of strict production specifications,the manufacturing department often has spoiled items.If the spoiled items are under 5 percent of a job's total items they are treated as normal spoilage.During February job #301 for 200 jackets had 8 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 $150 each.They had a cost at point of detection of $500 each.These costs included $250 for direct manufacturing labour,$200 for direct materials,and $50 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.

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 2015 are as follows: -What is the number of total spoiled units?

Scrap has no value (or minimal value)therefore it is not traced back to specific jobs.

There are two alternative points in time for recognizing scrap in the accounting records.What are these two points in time? Explain why a company might choose one over the other.

Which of the following entries would correctly record costs associated with reworked items?

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 weighted average method for process costing,the total cost of goods completed and transferred to finished goods is

Sales of scrap may be traced to the individual jobs in which it occurred when the ________ system is used.

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

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 per equivalent unit for direct materials and conversion costs respectively are

The costs of abnormal spoilage are written off as a loss;however,the costs of normal spoilage are treated as part of cost of goods manufactured.

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: -What cost is allocated to abnormal spoilage using the weighted-average process costing method?

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 2015.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: a.The spoilage is related to a specific job. b.The spoilage is common to all jobs. c.The spoilage is considered to be abnormal spoilage. 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: a.The rework is related to a specific job. b.The rework is common to all jobs. c.The rework is considered to be abnormal.

Endicott Shoes manufactures shoes.All direct materials are included at the inception of the production process.For March,there were 1,400 units in beginning inventory with a direct material cost of $700.Direct materials totaled $15,000 for the month.Work-in-process records revealed that 35,000 units were started in March and that 30,000 were finished.Normal spoilage of 2% of units finished was incurred.Ending work-in-process units are complete in respect to direct materials costs.Spoilage is not detected until the process is complete.Endicott uses the weighted-average method. 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?