Exam 18: Spoilage, rework, and Scrap

If the rework is abnormal ________.

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 entries is correct when the costs of the rework is normal and common to all the jobs?

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

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 undetectable material defects.Spoiled units generally constitute 5% of the good units.Data provided for February 2017 are as follows: Costs: What are the total costs of all the units that were started during February and subsequently shipped before the end of the period? (Round any cost per unit calculations to the nearest cent. )

Normal spoilage is usually regarded as avoidable and controllable.

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

If a company set a standard of zero rework ________.

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 undetectable materials defects.Spoiled units generally constitute 4% of the good units.Data for December 2017 are as follows: Costs for December: Normal spoilage totals ________.

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 standard-costing method ________.

New Image Sports uses a process-costing system.For March,the company had the following activities: 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.

When spoiled goods have a disposal value,the net cost of spoilage is computed by adding the disposal value to the costs of the spoiled goods accumulated to the inspection point.

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 undetectable material defects.Spoiled units generally constitute 4% of the good units.Data provided for February 2017 are as follows: Costs: Which of the following journal entries correctly represents the transfer of completed goods begun during February using the FIFO method of process costing? (Round any cost per unit calculations to the nearest cent. )

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 undetectable material defects.Spoiled units generally constitute 3% of the good units.Data provided for February 2017 are as follows: Costs: What are the normal and abnormal spoilage units,respectively,for February when using FIFO?

If scrap is reused as direct material rather than sold as scrap,which of the following would be the proper account?

Costs of abnormal spoilage are NOT considered to be inventoriable costs and are written off as costs of the accounting period in which the abnormal spoilage is detected.

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.

If a company inspects units only at the end of the production process,the units in ending work-in-process inventory are not assigned any costs of normal spoilage.

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.