Question 1

When spoiled goods have a disposal value,the net cost of the spoilage is computed by ________.

Accepted Answer

A)  deducting disposal value from the costs of the spoiled goods accumulated to the inspection point 
B)  adding the costs to complete a saleable product to the costs accumulated to the inspection point 
C)  deducting the costs to complete a saleable product from the costs accumulated to the inspection point 
D)  adding disposal value to the costs of the good units transferred 
A)  deducting disposal value from the costs of the spoiled goods accumulated to the inspection point 
B)  adding the costs to complete a saleable product to the costs accumulated to the inspection point 
C)  deducting the costs to complete a saleable product from the costs accumulated to the inspection point 
D)  adding disposal value to the costs of the good units transferred

Question 2

When normal spoilage is common to all jobs,the budgeted manufacturing overhead rate includes a provision for the normal spoilage cost.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

For each of the following items identify whether it is spoilage,reworked units,or scrap.
 ___a. Defective shirts sold as seconds
___b. End cuts from suit-making operations
___c. Edges from plastic moldings
___d. Carpets sold as seconds
___e. Precision tools that are not built successfully to the necessary tolerance, but which can be successfully converted to a saleable prod uct
___f. Rockextracted as a result of mining processing
___g. Complex defective products such as semiconductors

Accepted Answer

The answer of For each of the following items identify...

Question 5

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:
 $\begin{array} { l  }
\text { WIP, beginuing inventory } 2 / 1 / 2015&51,000 \text { units } \
 \text {Direct materials ( $ 100 \% $ complete) }\
 \text {Conversion costs ( $ 50 \% $ complete) }\\
\text { Started during February } & 170,000 \text { units } \
\text { Completed and transferred out } & 180,000 \text { units } \\
\text { WIP, ending inventory } 2 / 28 / 2015 & 26,000 \text { units }\
 \text {Direct materials ( $ 100 \% $ complete) }\
 \text { Conversion costs ( $ 25 \% $ complete)}\\
\text { Costs: }\\text { WIP, beginning inventory: }\
\text { Direct materials } & \$ 280,000 \
\text { Conversion costs } & 80,000 \
\text { Direct materials added } & 408,000 \
\text { Conversion costs added } & 264,000
\end{array}$

-What are the normal and abnormal spoilage units,respectively,for February when using FIFO?

Accepted Answer

A)  2,800 units; 2,960 units 
B)  5,100 units; 3,280 units 
C)  5,400 units; 9,600 units 
D)  5,400 units; 15,000 units 
A)  2,800 units; 2,960 units 
B)  5,100 units; 3,280 units 
C)  5,400 units; 9,600 units 
D)  5,400 units; 15,000 units

Question 6

Under the weighted-average method,the costs of normal spoilage are added to the costs of their related good units.Hence,the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced.

Accepted Answer

A) True 
 B)False

Question 7

When the dollar amount of scrap is immaterial,the simplest accounting is to record the physical quantity of scrap returned to the storeroom and to regard scrap sales as a separate line item in the income statement.

Accepted Answer

A) True 
 B)False

Question 8

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:
 $\begin{array}{ll}
\text { WIP, beginuing inventory } 12 / 1 / 2015&22,000 \text { units }\
\text { Direct materials ( } 100 \% \text { complete) }\
\text { Conversion costs ( } 75 \% \text { complete) }\
\text { Started during December } & 76,000 \text { units } \
\text { Completed and transferred out } 12 / 31 / 2015 & 72,000 \text { units } \
\text { WIP, ending inventory } 12 / 31 / 2015 & 18,000 \text { units }\\text { Direct materials ( } 100 \% \text { complete) }\\text { Conversion costs ( } 65 \% \text { complete) }\\\text { Costs for December: }\
\text { WIP, beginuning Inventory: }\\text { Direct materials } & \$ 150,000 \
\text { Conversion costs } & 76,800 \
\text { Direct materials added } & 222,400 \
\text { Conversion costs added } & 290,000
\end{array}$
-What is the total cost per equivalent unit using the weighted-average method of process costing?

Accepted Answer

A)  $3.80 
B)  $3.60 
C)  $7.80 
D)  $4.00 
A)  $3.80 
B)  $3.60 
C)  $7.80 
D)  $4.00

Question 9

Spoilage is typically assumed to occur at the stage of completion where inspection takes place.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following sentences is true of normal spoilage and abnormal spoilage?

Accepted Answer

A)  Normal spoilage costs are inventoriable and are added to the cost of good units produced, while abnormal spoilage costs are deducted from the cost of good units produced. 
B)  Abnormal spoilage costs are inventoriable and are deducted from the cost of good units produced, while normal spoilage costs are expensed in the accounting period in which they occur. 
C)  Abnormal spoilage costs are inventoriable and are added to the cost of good units produced, while normal spoilage costs are expensed in the accounting period in which they occur. 
D)  Normal spoilage costs are inventoriable and are deducted from the cost of good units produced, while abnormal spoilage costs are expensed in the accounting period in which they occur. 
A)  Normal spoilage costs are inventoriable and are added to the cost of good units produced, while abnormal spoilage costs are deducted from the cost of good units produced. 
B)  Abnormal spoilage costs are inventoriable and are deducted from the cost of good units produced, while normal spoilage costs are expensed in the accounting period in which they occur. 
C)  Abnormal spoilage costs are inventoriable and are added to the cost of good units produced, while normal spoilage costs are expensed in the accounting period in which they occur. 
D)  Normal spoilage costs are inventoriable and are deducted from the cost of good units produced, while abnormal spoilage costs are expensed in the accounting period in which they occur.

Question 11

Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point?

Accepted Answer

A)  Unit cost of normal spoilage is more than unit cost of abnormal spoilage. 
B)  Unit cost of normal spoilage is equal to unit cost of abnormal spoilage. 
C)  Unit cost of abnormal spoilage is more than unit cost of normal spoilage. 
D)  Addition of unit cost of normal spoilage and unit cost of abnormal spoilage is equal to unit cost of good units produced and transferred. 
A)  Unit cost of normal spoilage is more than unit cost of abnormal spoilage. 
B)  Unit cost of normal spoilage is equal to unit cost of abnormal spoilage. 
C)  Unit cost of abnormal spoilage is more than unit cost of normal spoilage. 
D)  Addition of unit cost of normal spoilage and unit cost of abnormal spoilage is equal to unit cost of good units produced and transferred.

Question 12

500 shirts are sold as seconds at $12 per shirt.Cost of spoiled shirts is $500,000.Cost of shirts at inspection point equals $9,500,000.Calculate the net cost of the spoilage.

Accepted Answer

A)  $9,494,000 
B)  $494,000 
C)  $506,000 
D)  $9,506,000 
A)  $9,494,000 
B)  $494,000 
C)  $506,000 
D)  $9,506,000

Question 13

Cost of spoiled units equals ________.

Accepted Answer

A)  all costs incurred in producing them up to the point of delivery 
B)  all costs incurred in producing them up to the point of inspection 
C)  all costs incurred in producing them up to the point of selling 
D)  all costs incurred in producing them up to the point of packaging 
A)  all costs incurred in producing them up to the point of delivery 
B)  all costs incurred in producing them up to the point of inspection 
C)  all costs incurred in producing them up to the point of selling 
D)  all costs incurred in producing them up to the point of packaging

Question 14

Which of the following is a journal entry to recognize the disposal value?

Accepted Answer

A) 
$\begin{array} { l l } 
\text { Materials Control } & XXX \
\text { Work-in-Process Control } & XXX \
\text { Manufacturing Overhead Control } &&XXX
\end{array}$ 
B) 
$\begin{array}{ll}
\text { Work-in-Process Control } &XXX \
\text { Manufacturing Overhead Control } & XXX\
\text { Materials Control }&&XXX
\end{array}$ 
C) 
$\begin{array} { l  }
 \text {Manufacturing Overhead Control }& XXX\ \text { Work-in-Process Contmol }&XXX \
\end{array}$ 
D) 
$\begin{array} { l  }
 \text {Materials Control }& XXX\ \text { Work-in-Process Contmol }&XXX \
\end{array}$ 
A) 
$\begin{array} { l l } 
\text { Materials Control } & XXX \
\text { Work-in-Process Control } & XXX \
\text { Manufacturing Overhead Control } &&XXX
\end{array}$ 
B) 
$\begin{array}{ll}
\text { Work-in-Process Control } &XXX \
\text { Manufacturing Overhead Control } & XXX\
\text { Materials Control }&&XXX
\end{array}$ 
C) 
$\begin{array} { l  }
 \text {Manufacturing Overhead Control }& XXX\ \text { Work-in-Process Contmol }&XXX \
\end{array}$ 
D) 
$\begin{array} { l  }
 \text {Materials Control }& XXX\ \text { Work-in-Process Contmol }&XXX \
\end{array}$

Question 15

The Duolane 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 $180,000 for the month.Work-in-process records revealed that 3,000 tons were started in April and that 2,100 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 is the cost per equivalent unit?
b.What are the costs assigned to completed units?
c.What are the costs transferred out?
d.What are the amounts allocated to the work-in-process ending inventory?

Accepted Answer

The answer of The Duolane Pottery manufactures pottery products.All direct...

Question 16

Colil Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $300,000 during the month. Work-in-process records revealed that 10,000 card units were started in January, 5,000 card units were complete, and 4,000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.
-What is the amount allocated to the work-in-process ending inventory?

Accepted Answer

A)  $40,000 
B)  $50,000 
C)  $30,000 
D)  $75,000 
A)  $40,000 
B)  $50,000 
C)  $30,000 
D)  $75,000

Question 17

Units spoiled due to machine breakdowns and operator errors are normal spoilage.

Accepted Answer

A) True 
 B)False

Question 18

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:
 $\begin{array} { l  }
\text { WIP, beginuing inventory } 2 / 1 / 2015&51,000 \text { units } \
 \text {Direct materials ( $ 100 \% $ complete) }\
 \text {Conversion costs ( $ 50 \% $ complete) }\\
\text { Started during February } & 170,000 \text { units } \
\text { Completed and transferred out } & 180,000 \text { units } \\
\text { WIP, ending inventory } 2 / 28 / 2015 & 26,000 \text { units }\
 \text {Direct materials ( $ 100 \% $ complete) }\
 \text { Conversion costs ( $ 25 \% $ complete)}\\
\text { Costs: }\\text { WIP, beginning inventory: }\
\text { Direct materials } & \$ 280,000 \
\text { Conversion costs } & 80,000 \
\text { Direct materials added } & 408,000 \
\text { Conversion costs added } & 264,000
\end{array}$

-What are the total costs of all the units that were started during February and subsequently shipped before the end of the period?

Accepted Answer

A)  $628,560 
B)  $503,100 
C)  $636,320 
D)  $398,250 
A)  $628,560 
B)  $503,100 
C)  $636,320 
D)  $398,250

Question 19

Distinguish among spoilage,reworked units,and scrap.Give an example of each.

Accepted Answer

Spoilage refers to unacceptable units of

Question 20

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:
 $\begin{array} { l  }
\text { WIP, beginuing inventory } 2 / 1 / 2015&51,000 \text { units } \
 \text {Direct materials ( $ 100 \% $ complete) }\
 \text {Conversion costs ( $ 50 \% $ complete) }\\
\text { Started during February } & 170,000 \text { units } \
\text { Completed and transferred out } & 180,000 \text { units } \\
\text { WIP, ending inventory } 2 / 28 / 2015 & 26,000 \text { units }\
 \text {Direct materials ( $ 100 \% $ complete) }\
 \text { Conversion costs ( $ 25 \% $ complete)}\\
\text { Costs: }\\text { WIP, beginning inventory: }\
\text { Direct materials } & \$ 280,000 \
\text { Conversion costs } & 80,000 \
\text { Direct materials added } & 408,000 \
\text { Conversion costs added } & 264,000
\end{array}$

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

Accepted Answer

A)  $21,060; $37,440 
B)  $12,960; $37,440 
C)  $14,400; $12,960 
D)  $16,000; $8,000 
A)  $21,060; $37,440 
B)  $12,960; $37,440 
C)  $14,400; $12,960 
D)  $16,000; $8,000

When spoiled goods have a disposal value,the net cost of the spoilage is computed by ________.

When normal spoilage is common to all jobs,the budgeted manufacturing overhead rate includes a provision for the normal spoilage cost.

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

Under the weighted-average method,the costs of normal spoilage are added to the costs of their related good units.Hence,the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced.

When the dollar amount of scrap is immaterial,the simplest accounting is to record the physical quantity of scrap returned to the storeroom and to regard scrap sales as a separate line item in the income statement.

Spoilage is typically assumed to occur at the stage of completion where inspection takes place.

Which of the following sentences is true of normal spoilage and abnormal spoilage?

Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point?

500 shirts are sold as seconds at $12 per shirt.Cost of spoiled shirts is $500,000.Cost of shirts at inspection point equals $9,500,000.Calculate the net cost of the spoilage.

Cost of spoiled units equals ________.

Which of the following is a journal entry to recognize the disposal value?

Units spoiled due to machine breakdowns and operator errors are normal spoilage.

Distinguish among spoilage,reworked units,and scrap.Give an example of each.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 18: Spoilage, rework, and Scrap

When spoiled goods have a disposal value,the net cost of the spoilage is computed by ________.

When normal spoilage is common to all jobs,the budgeted manufacturing overhead rate includes a provision for the normal spoilage cost.

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

Under the weighted-average method,the costs of normal spoilage are added to the costs of their related good units.Hence,the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced.

When the dollar amount of scrap is immaterial,the simplest accounting is to record the physical quantity of scrap returned to the storeroom and to regard scrap sales as a separate line item in the income statement.

Spoilage is typically assumed to occur at the stage of completion where inspection takes place.

Which of the following sentences is true of normal spoilage and abnormal spoilage?

Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point?

500 shirts are sold as seconds at $12 per shirt.Cost of spoiled shirts is $500,000.Cost of shirts at inspection point equals $9,500,000.Calculate the net cost of the spoilage.

Cost of spoiled units equals ________.

Which of the following is a journal entry to recognize the disposal value?

Units spoiled due to machine breakdowns and operator errors are normal spoilage.

Distinguish among spoilage,reworked units,and scrap.Give an example of each.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters