Exam 18: Spoilage, rework, and Scrap

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 is the number of total spoiled units?

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. -At Waldorf Computer Systems Inc.what amounts are allocated to ending work-in-process inventory assuming spoilage units are recognized in the equivalent unit calculation,and that they are ignored,respectively?

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

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 equivalent units for direct materials and conversion for October are

Redwing Shoes manufactures shoes.All direct materials are included at the inception of the production process.For March there were 2,000 units in beginning inventory with a direct material cost of $1,000.Direct materials totalled $20,000 for the month.Work-in-process records revealed that 40,000 shoes were started in March and that 36,000 were finished.Normal spoilage of 5 percent 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.Redwing 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?

Costs of normal spoilage are usually accounted for as

Normal spoilage is avoidable and controllable.

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 are the costs per equivalent unit for direct materials and conversion respectively?

The standard-costing method

The costs of normal spoilage are usually assigned to individual jobs in job costing.

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?

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

Normal spoilage is usually computed on the basis of

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: 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.

What is the effect of the following journal entry?

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 are the Waldorf Computer Systems Inc.respective direct material costs per equivalent unit assuming spoiled units are counted when computing output in equivalent units,and when not counting spoiled units in the equivalent unit total?

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?

When abnormal rework is distinguished from normal rework,and charged to a separate loss account,which of the following is a likely result?

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. -At Waldorf Computer Systems Inc.spoilage costs allocated to completed units are larger by which method and by how much?

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