Exam 18: Spoilage, rework, and Scrap

Normal spoilage rates for a manufacturing process should be computed on the basis of

Spoilage can be attributed to a particular job in a process costing system.

Which of the following can be used in accounting for spoilage?

Boss Manufacturing 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.Boss has a policy never to rework spoiled units.Management believes that once a unit is damaged it cannot be reworked into a quality product. What is the appropriate journal entry if 500 units are considered abnormal spoilage in a job costing system?

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: -Normal spoilage totalled

When scrap is returned to the storeroom,so that it may be used as direct material,which account is debited?

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

Shazam Machines produces numerous types of money change machines.All machines are made in the same production department and many use exactly the same processes.Because customers have such different demands for the machine characteristics,the company uses a job costing system.Unfortunately,some of the production managers have been upset for the last few months when their jobs were charged with the spoilage that occurred over an entire processing run of several types of machines.Some of the best managers have even threatened to quit unless the accounting system is changed. Required:What recommendations can you suggest to improve the accounting for spoilage?

New Image Sports uses a process costing system.Direct materials are placed into production at the beginning of the process.All spoilage is normal and is detected at the end of the process.For March the company had the following activities: Required: Prepare a production cost worksheet assuming that spoilage is recognized and the FIFO method is used.

Costs incurred due to spoilage in a job order costing system,may be treated in all of the following ways,EXCEPT

Which of the following journal entries could appropriately record the cash sale of scrap?

Dutton Industries is a manufacturer of cleaning products.Its main product goes through two departments: Mixing and Bottling.During June,the beginning WIP in the Mixing department was 32% complete as to conversion cost.The beginning inventory included $15,200 for materials and $19,800 for conversion costs.Ending WIP in the Mixing department was 80% complete.All direct materials are added at the beginning of the process in each department.Inspection occurs at the end of the process in both departments.Normal spoilage is 2.5% of good output in Mixing and 1.4% of good output in Bottling.Beginning WIP in Bottling was 60% complete with respect to conversion costs and ending WIP was 30% converted.Beginning WIP included $8,850 for direct materials,$72,200 for transferred in costs and $23,800 for conversion costs.Additional information follows: Required: Prepare a production cost worksheet using weighted-average for the Mixing department and FIFO for the Bottling department assuming that spoilage is recognized.

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 weighted-average method is used. b.Prepare journal entries to record transferring out of cost from the work-in-process accounts.

The Clay Shop 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 $310,000 for the month.Work-in-process records revealed that 5,000 kilograms were started in April and that 3,000 kilograms were finished;1,000 kilograms 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?

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

Scrap products may be reprocessed and subsequently sold as a finished good.

An item classified as spoilage has no value.

Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit.

You are the chief financial officer of a lumber mill,and you are becoming quite concerned about the spoilage,scrap,and reworked items associated with your production processes.Your firm produces mainly products for the building industry. Required: Discuss the problems associated with these items and the methods your company can use to reduce spoilage,scrap,and reworked items.

Reworked goods are unacceptable units of production usually not capable of being repaired or converted into a salable product.