Exam 18: Spoilage, rework, and Scrap

To recognize the disposal value of normal spoilage,________.

Normal spoilage is usually regarded as avoidable and controllable.

Which of the following statements is true of an abnormal spoilage?

What is the distinction between normal and abnormal spoilage?

Normal spoilage is computed on the basis of the number of ________.

Which of the following entries reflects the original cost assignment to spoiled units before considering rework cost?

Why do firms often conduct multiple inspections?

Busy Hands Craft Company is a small manufacturing company that specializes in arts and crafts items.It recently bought an old textile mill that it has refurbished to manufacture and dye special cloth to be sold in its craft shops.However,it discovered something new for its accounting system.The company never before had finished goods that did not meet standard,leftover materials from processing runs,or unacceptable outputs. Required: As the business consultant for the company,explain how it can handle the items mentioned.Include any potential problems with the accounting procedures.

Answer the following questions using the information below: Samantha's Office Supplies manufactures desk organizers 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 3% of the good units. Data provided for February 2015 are as follows: WIP, beginuing inventory 2/1/2015 51,000 units Direct materials ( 100 \% complete) Conversion costs ( 50\% complete) Started during February 170,000 units Completed and transferred out 180,000 units WIP, ending inventory 2/28/2015 26,000 units Direct materials ( 100\% complete) Conversion costs ( 25\% complete) Costs: WIP, beginning inventory: Direct materials \ 280,000 Conversion costs 80,000 Direct materials added 408,000 Conversion costs added 264,000 -What is the total costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped? Take into account the costs related to the completion of the conversion of the units during the month.Use the FIFO method of process costing.

Scrap is residual material that results from manufacturing a product; it has low total sales value compared with the total sales value of the product.

The first step in the five-step procedure for process costing with spoilage is to compute the output in terms of equivalent units.

If scrap is returned to the company's storeroom and inventoried,it should NOT have any value in the accounting records.

Scrap is usually divided between normal and abnormal scrap.

Costs of abnormal spoilage are usually accounted for 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.

Abnormal spoilage is spoilage inherent in a particular production process.

Under standard costing,there is no need to calculate a cost per equivalent unit.

The costs of normal spoilage are allocated to the units in ending work-in-process inventory,in addition to completed units if the units ________.

Which of the following correctly reflects what units passed inspection this period? Assume beginning work in process was completed and ending work in process was started during the period. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Inspection Point at Completion Level }$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 10\% 50\% 100\%

The downside to conducting inspections at too early a stage is that units spoiled at later stages of the process may go undetected.