Exam 18: Spoilage, rework, and Scrap

What is the effect of the following journal entry?

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

Accounting for rework in process-costing requires that abnormal rework be distinguished from normal rework.

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?

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:

Explain the meaning of the terms spoilage,scrap,and rework.Provide an example of each.Is it possible for a single firm to have all three from a single productive process?

Boss Cycle 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.Disposal fees typically run $5.00 per item.Boss Cycle has a policy never to rework spoiled units.Management believes that once a unit is damaged it cannot be reworked into a quality product.The losses are charged back to the specific job. What is the appropriate journal entry if 300 units are considered abnormal spoilage and are not disposed of in a process costing system?

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 completed 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 percent of direct manufacturing labour costs.Ending work-in-process inventory in the assembly department was 40 percent 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 percent complete as to conversion and ending work-in-process was 25 percent converted.Direct materials are added at the end of the process.Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs.Overhead in this department is equal to direct manufacturing labour 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 assuming that spoilage is recognized.

Boutin Company uses a job costing system.During October,the following costs are incurred on Job 110 to manufacture 200 motors: Original costs: 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.

Process costing is simplified when using standard costs.

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

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?

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.

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 Job 124 created scrap that is common to all jobs?

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?

An example of rework is when a shoe manufacturer uses leftover leather from shoes to make leather watch bands.

Carriage Florists operate a flower shop.Because most of the orders are via telephone,fax or email,numerous orders have to be reworked.The average cost of the reworked orders is $4: $2.50 for labour,$1 for more flowers,and $0.50 for overhead.This ratio of costs holds for the average original order and includes a provision for rework common to all jobs.On a recent day the shop reworked 32 orders out of 166.The original cost of the 32 orders totalled $480.The average cost of all orders is $12.50,including rework,with an average selling price of $20. Required: Prepare the necessary journal entry,or entries,to record the rework for the day if the shop charges such activities to Arrangement Department Overhead Control.Prepare a journal entry to transfer the finished goods to Finished Goods Inventory.

Robotoys Incorporated manufactures and distributes small robotic toys.Reworked units are common.The average cost of the reworked orders is $11.30: $4.15 for labour,$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.

The unit costs of abnormal and normal spoilage are equal,when the two are detected simultaneously.

The costs from abnormal spoilage should appear