Exam 18: Spoilage, rework, and Scrap

Robolane Incorporated manufactures and distributes small robotic toys.Because most of its orders are via telephone or fax,numerous orders have to be reworked.The average cost of the reworked orders is $12.45: $5 for labor,$5.15 for more materials,and $2.30 for overhead.This ratio of costs holds for the average original order.On a recent day,the shop reworked 80 orders out of 800.The original cost of the 80 orders totaled $2,000.The average cost of all orders is $26.245,including rework,with an average selling price of $35. 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 inspection point is the ________.

Answer the following questions using the information below: Verer Custom Carpentry manufactures chairs in its Processing Department. 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 as units are placed into production. After inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 4% of the good units. Data provided for March 20X5 are as follows: ( WIP, beginuing inventory 3/1/20\times5 32,000 units Direct materials ( 100\% complete) Conversion costs ( 85\% complete) Started during March 70,000 units Completed and transferred out 80,000 units WIP, ending inwentory 3/31/20\times5 18,000 units Direct materials ( 100\% complete) Conversion costs ( 80\% complete) Costs: WIP, beginning inventory: Direct materials \ 70,000 Conversion costs 40,000 Direct materials added 105,000 Conversion costs added 128,160 -What are the normal and abnormal spoilage units,respectively,for March when using FIFO?

Costs of normal spoilage are usually accounted for as ________.

Scrap and rework are considered to be the same thing by managerial accountants.

Dynalia Florists operate a flower shop.Because most of their orders are via telephone or fax,numerous orders have to be reworked.The average cost of the reworked orders is $5.25: $3.50 for labor,$1.25 for more flowers,and $0.50 for overhead.This ratio of costs holds for the average original order.On a recent day,the shop reworked 40 orders out of 250.The original cost of the 40 orders totaled $700.The average cost of all orders is $18.34,including rework,with an average selling price of $25. Required: Prepare the necessary journal entry 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.

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

Which of the following statements is true of scrap?

If the rework is abnormal ________.

Spoilage refers to ________.

Answer the following questions using the information below: Outose 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 nondetectible materials defects. Inspection occurs when units are 50% converted. Spoiled units generally constitute 4% of the good units. Data for December 2015 are as follows: WIP, beginuing inventory 12/1/2015 22,000 units Direct materials ( 100\% complete) Conversion costs ( 75\% complete) Started during December 76,000 units Completed and transferred out 12/31/2015 72,000 units WIP, ending inventory 12/31/2015 18,000 units Direct materials ( 100\% complete) Conversion costs ( 65\% complete) Costs for December: WIP, beginuning Inventory: Direct materials \ 150,000 Conversion costs 76,800 Direct materials added 222,400 Conversion costs added 290,000 -What cost is allocated to abnormal spoilage using the weighted-average process-costing method?

Which of the following journal entries correctly represents the transfer of completed goods begun during February using the FIFO method of process costing?

The cost per good unit in the weighted-average method is equal to the ________.

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: Beginuing work in process 40,000 units Units started 52,000 units Units completed 73,000 units Ending work in process 16,000 units Spoilage 3,000 units Beginning work-in-process direct materials \ 30,000 Beginning work-in-process conversion \ 8,000 Direct materials added during month \ 126,400 Direct manufacturing labor during month \ 60,480 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 40% of direct manufacturing labor.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.

Companies calculate the units of abnormal spoilage and record the cost in the Loss from Abnormal Spoilage account,which appears as a separate line item in an income statement.

Which of the following statement is true of costs of normal and abnormal spoilage?

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

There is no difference between scrap which can be sold for relatively small amount and a byproduct.

All accounting systems must assume that the inspection point occurs when a process is 100% complete.

Answer the following questions using the information below: Verer Custom Carpentry manufactures chairs in its Processing Department. 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 as units are placed into production. After inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 4% of the good units. Data provided for March 20X5 are as follows: ( WIP, beginuing inventory 3/1/20\times5 32,000 units Direct materials ( 100\% complete) Conversion costs ( 85\% complete) Started during March 70,000 units Completed and transferred out 80,000 units WIP, ending inwentory 3/31/20\times5 18,000 units Direct materials ( 100\% complete) Conversion costs ( 80\% complete) Costs: WIP, beginning inventory: Direct materials \ 70,000 Conversion costs 40,000 Direct materials added 105,000 Conversion costs added 128,160 -What costs would be associated with normal and abnormal spoilage,respectively,using the FIFO method of process costing?