Question 1

There is a tradeoff between the speed of production and the normal spoilage rate.

Accepted Answer

A) True 
 B)False

Question 2

The loss from abnormal spoilage account would appear ________.

Accepted Answer

A)  on a balance sheet 
B)  as a detailed item in the retained earnings schedule of a balance sheet 
C)  a separate line item on an income statement 
D)  a deduction from the cost of goods sold 
A)  on a balance sheet 
B)  as a detailed item in the retained earnings schedule of a balance sheet 
C)  a separate line item on an income statement 
D)  a deduction from the cost of goods sold

Question 3

Spoilage can be a significant cost for many organizations.Discuss when spoilage might happen and how the costs of normal spoilage get allocated.

Accepted Answer

Spoilage may occur at various stages of

Question 4

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

Accepted Answer

A)  Normal spoilage is inherent in a particular production process, whereas abnormal spoilage is not inherent in a particular production process. 
B)  Abnormal spoilage arises even when the process is carried out in an efficient manner, whereas normal spoilage does not arise when the process is carried out in an efficient manner. 
C)  Normal spoilage is usually regarded as avoidable and controllable, whereas abnormal spoilage is unavoidable and uncontrollable. 
D)  The costs of normal spoilage are recorded as a loss as a separate line item in an income statement, whereas costs of abnormal spoilage are included as a component of the costs of good units manufactured. 
A)  Normal spoilage is inherent in a particular production process, whereas abnormal spoilage is not inherent in a particular production process. 
B)  Abnormal spoilage arises even when the process is carried out in an efficient manner, whereas normal spoilage does not arise when the process is carried out in an efficient manner. 
C)  Normal spoilage is usually regarded as avoidable and controllable, whereas abnormal spoilage is unavoidable and uncontrollable. 
D)  The costs of normal spoilage are recorded as a loss as a separate line item in an income statement, whereas costs of abnormal spoilage are included as a component of the costs of good units manufactured.

Question 5

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?

Accepted Answer

Because the manufacturing process uses s

Question 6

If scrap is reused as direct material rather than sold as scrap ________.

Accepted Answer

A)  Accounts Receivable is debited at its estimated net realizable value and then credited when the scrap is reused 
B)  Materials Control is debited at its estimated net realizable value and then credited when the scrap is reused 
C)  Manufacturing Overhead Control is debited at its estimated net realizable value and then credited when the scrap is reused 
D)  Work-in-Process Control is debited at its estimated net realizable value and then credited when the scrap is reused 
A)  Accounts Receivable is debited at its estimated net realizable value and then credited when the scrap is reused 
B)  Materials Control is debited at its estimated net realizable value and then credited when the scrap is reused 
C)  Manufacturing Overhead Control is debited at its estimated net realizable value and then credited when the scrap is reused 
D)  Work-in-Process Control is debited at its estimated net realizable value and then credited when the scrap is reused

Question 7

When the amount of scrap is immaterial,which of the following is the easiest accounting entry when recording scrap sold for cash?

Accepted Answer

A)  Sales of Scrap
Cash 
B)  Manufacturing Overhead Control
Cash 
C)  Cash
Scrap Revenues 
D)  Sales of scrap
Accounts Receivable 
A)  Sales of Scrap
Cash 
B)  Manufacturing Overhead Control
Cash 
C)  Cash
Scrap Revenues 
D)  Sales of scrap
Accounts Receivable

Question 8

The unit costs of normal and abnormal spoilage are the same when the two are detected at the same inspection point.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  $37,440; $48,000 
B)  $72,000; $44,460 
C)  $68,400; $46,800 
D)  $67,120; $44,320 
A)  $37,440; $48,000 
B)  $72,000; $44,460 
C)  $68,400; $46,800 
D)  $67,120; $44,320

Question 10

Some amounts of spoilage,rework,or scrap are inherent in many production processes.

Accepted Answer

A) True 
 B)False

Question 11

New Image Sports uses a process-costing system.For March,the company had the following activities:
 $$\begin{array} { l r } 
\text { Beginuning work-in-process inventory (1/3 complete) } & 7,200 \text { units } \
\text { Units placed in prod uction } & 28,800 \text { units } \
\text { Good units completed } & 21,600 \text { units } \
\text { Ending work-in-process inventory } & 12,000 \text { units } \
\text { Cost of be ginning work in process } & \$ 6,000 \
\text { Direct material costs, current } & \$ 21,600 \
\text { Conversion costs, current } & \$ 14,400
\end{array}$$ 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.Ending WIP is 60% completed as to conversion.
Required:
Prepare a production cost worksheet using the FIFO method.

Accepted Answer

Normal spoilage = 7,200 + 28,8

Question 12

The Peric Manufacturing Shop produces motorcycle parts.Typically,12 pieces out of a job lot of 1,000 parts are spoiled.Costs are assigned at the inspection point,$40.00 per unit.Spoiled pieces may be disposed at $8.00 per unit.The spoiled goods must be inventoried appropriately when the normal spoilage is detected.The current job requires the production of 3,000 good parts. Which of the following journal entries would be correct if the spoilage occurred due to specifications required for Job 101?

Accepted Answer

A)  $\begin{array} { l  }
 \text {Work-in-Process Control  } &96\ \text {Materials Control } &96\
\end{array}$ 
B)  $\begin{array} { l  }
 \text { Materials Control} &96\ \text {Work-in-Process Control } &96\
\end{array}$ 
C)  $\begin{array} { l  }
 \text {Materials Control } &288\ \text {Work-in-Process Control } &288\
\end{array}$ 
D)  $\begin{array} { l  }
 \text {Work-in-Process Control  }&288 \\text {Materials Control }&288 \
\end{array}$ 
A)  $\begin{array} { l  }
 \text {Work-in-Process Control  } &96\ \text {Materials Control } &96\
\end{array}$ 
B)  $\begin{array} { l  }
 \text { Materials Control} &96\ \text {Work-in-Process Control } &96\
\end{array}$ 
C)  $\begin{array} { l  }
 \text {Materials Control } &288\ \text {Work-in-Process Control } &288\
\end{array}$ 
D)  $\begin{array} { l  }
 \text {Work-in-Process Control  }&288 \\text {Materials Control }&288 \
\end{array}$

Question 13

Under the FIFO method,all spoilage costs are assumed to be related to the units completed during this period using the unit costs of the current period.

Accepted Answer

A) True 
 B)False

There is a tradeoff between the speed of production and the normal spoilage rate.

The loss from abnormal spoilage account would appear ________.

Spoilage can be a significant cost for many organizations.Discuss when spoilage might happen and how the costs of normal spoilage get allocated.

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

If scrap is reused as direct material rather than sold as scrap ________.

When the amount of scrap is immaterial,which of the following is the easiest accounting entry when recording scrap sold for cash?

The unit costs of normal and abnormal spoilage are the same when the two are detected at the same inspection point.

Some amounts of spoilage,rework,or scrap are inherent in many production processes.

Under the FIFO method,all spoilage costs are assumed to be related to the units completed during this period using the unit costs of the current period.

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

There is a tradeoff between the speed of production and the normal spoilage rate.

The loss from abnormal spoilage account would appear ________.

Spoilage can be a significant cost for many organizations.Discuss when spoilage might happen and how the costs of normal spoilage get allocated.

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

If scrap is reused as direct material rather than sold as scrap ________.

When the amount of scrap is immaterial,which of the following is the easiest accounting entry when recording scrap sold for cash?

The unit costs of normal and abnormal spoilage are the same when the two are detected at the same inspection point.

Some amounts of spoilage,rework,or scrap are inherent in many production processes.

Under the FIFO method,all spoilage costs are assumed to be related to the units completed during this period using the unit costs of the current period.

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