Exam 18: Spoilage, rework, and Scrap

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 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?

Deducting the disposal value from the costs of the spoiled goods accumulated to the point of inspection equals

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: -Abnormal spoilage totalled

Which of the following journal entries correctly represents the transfer of completed goods for the current period using the FIFO method of process costing?

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

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 journal entry correctly records the sale of scrap from Job 117 for $250?

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

Marvin Randall had a background in the manufacturing of building bricks.The building brick industry used clay and other material which were first mixed,then aged.After aging,they were molded into shapes,retouched and fired in kilns.The materials were fairly durable and spoilage was not significant.As a result,any spoilage that did occur was not specifically accounted for.Marvin saw the similarities between brick and tile manufacturing and felt that he could apply his knowledge successfully in tile manufacturing and started his business,Randall Tile Ltd.on July 1. In tile manufacturing,as it brick manufacturing,the process starts with the selection of the raw materials including clays.However feldspar,sand,and other materials are used.In the initial stages,it is important that all materials are homogenized;this is done through a wet grinding process.The material output of this process is known as slip. Water content is then removed from the slip through spray-drying .After,the material is moulded ,pressed and dried before the tiles are fired.Hydraulic presses are used to guarantee maximum compaction.Consistency in the press cycle time is critical to ensure the tiles have the correct moisture content.If the water content is too high,the tiles will crack or break. Unglazed tiles proceed to firing,whereas glazed tiles must first be covered with one or more layers of glaze.Firing time and temperature are important in the firing process to ensure the resulting product meets required specifications for strength,stability,resistance and easy cleaning. After firing,tiles are inspected for quality.Irregularities in size,shape or colouring will lead to spoiled units.The final step is packing the ceramic tiles. Randall Tile was organized into 4 main departments.: 1)Mixing & Grinding,2)Moulding & Pressing,3)Glazing & Firing and 4)Inspecting & Packing.Randall was not manufacturing many glazed tiles,so any glazing that was required was done in the Firing department.The weighted average method of process costing was used in each department,however spoilage was not tracked.Marvin quickly realized that,although the processes in brick and tile manufacturing processes were similar,tile manufacturing required much more precision.After 3 months of operations,he estimated that he had a 50% defect rate when considering all stages of manufacturing.Employees were frustrated by the constant changes in manufacturing as pressing times,firing times,and temperatures were all altered in attempts to improve quality.Furthermore,Marvin believed that both frustration and nervousness led to high spoilage in the packing process. Required: What factors might have contributed to the high defect rate that Marvin noted? What steps might Marvin have taken prior to starting production to minimize defects? What recommendations would you make to Marvin regarding the management accounting system at Randall Tile?

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 are the amounts of direct materials and conversion costs assigned to ending work-in-process using the weighted-average process costing method?

All spoilage costs are related to the units completed during the period using the unit costs of the current period under FIFO.

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 would be associated with normal and abnormal spoilage,respectively,using the FIFO method of process costing?

Costs in beginning inventory are pooled with costs in the current period when determining the costs of good units under the weighted-average method of process costing.

One of the major aspects of accounting for scrap is inventory costing,which includes when and how scrap affects operating income.

When assigning costs,job-costing systems generally distinguish normal spoilage attributable to a specific job from normal spoilage common to all jobs.

Total cost per equivalent unit using the weighted-average method equals

When calculating normal spoilage rates,the base should be the actual units started in production.

Intelligent Composite Materials Inc.is a manufacturer of advanced composites that can be formed electronically.Direct materials are added at the start of the production process.Conversion costs are added evenly during the process.Some units of the product XJ1 are spoiled as a result of defects not detectable before inspection of finished goods.Spoiled units are disposed of at zero net disposal value.The company uses standard costs with $300 per equivalent unit for direct materials,and $90 per equivalent unit for conversion costs for both beginning work-in-process inventory and work done during the period.Summary data for the month of July follow: Required: a.Prepare a production cost report assuming the spoilage is recognized. b.Prepare the necessary journal entry to record abnormal spoilage.

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 of process costing,the cost per equivalent unit for direct materials and conversion costs respectively are

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 normal and abnormal spoilage units,respectively,for March?

The last step in the five-step procedure for process costing with spoilage is to summarize total costs to account for.