Exam 18: Spoilage, rework, and Scrap

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.

Which of the following statements is FALSE?

Material left over when making a product is referred to as

When rework is normal and NOT attributable to a specific job,the costs of rework are charged to manufacturing overhead and are spread,through overhead allocation,over all jobs.

When a unit has to be reworked,the rework may be classified in three ways.What are those ways,and how does the accounting for each differ?

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

Playtime Ltd.manufactures toys in two departments: Forming and Finishing.During August,the beginning WIP in the Forming Department was 38% complete with respect to conversion,direct materials are added at the beginning of the process.The beginning inventory in Forming included $36,400 for materials and $9,400 for conversion costs.Ending WIP in the Forming department was 70% complete.In the second department,Finishing,direct materials are added at the end of the process.Beginning WIP in Finishing was 22% complete with respect to conversion costs and ending WIP was 85% converted.Beginning WIP included $35,200 for transferred in costs and $12,350 for conversion costs.Additional information follows: Required: Prepare a production cost worksheet using weighted-average for the Forming department and FIFO for the Finishing department assuming the spoilage is recognized.

The Hawg Manufacturing Shop produces motorcycle parts.Typically,20 pieces out of a job lot of 2,000 parts are normally spoiled.Costs are assigned at the inspection point,$100.00 per unit.Spoiled pieces may be disposed of for proceeds of $20.00 per unit.The spoiled goods must be inventoried appropriately when the normal spoilage is detected.The current job requires the production of 5,000 good parts. Which of the following journal entries properly reflects the recording of spoiled goods?

Viking Sports is a manufacturer of sport swear.It produces all of its products in one department.The information for the current month is as follows: Beginning work-in-process was half complete as to conversion.Direct materials are added at the beginning of the process.Factory overhead is applied at a rate equal to 50 percent of direct manufacturing labour.Ending work-in-process was 60 percent complete.All spoilage is normal and is detected at end of the process. Required: Prepare a production cost worksheet assuming that spoilage is recognized and the weighted-average method is used.

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

Harriette has been reviewing the accounting system for her company and is very concerned about the accounting for spoilage.It appears that spoilage is accounted for only at the end of the processing cycle.While this concept is acceptable in general,Harriette believes that a better method can be found to properly account for the spoilage when it occurs.She believes that there must be something better than the weighted-average method of accounting for spoilage.She would like the company to use a method that provides closer tracking of the spoilage with the accounting for the spoilage. Required: Discuss the problems Harriette is having with the accounting system.

Spoilage that should not arise under efficient operating conditions is referred to as

What are the objectives in accounting for spoilage?

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 are the direct materials and conversion costs of all the units that were started and completed during February?

The goal of separately identifying abnormal spoilage is to

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

The calculation of equivalent units under standard costing is the same as under FIFO.

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 total cost per equivalent unit using the weighted-average method of process costing?

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.direct material cost assigned to good units completed when spoilage units are recognized in the total equivalent units?

When normal spoilage is detected,the work-in-process control account is debited in a job costing system.