Deck 18: Spoilage, Rework, and Scrap

Question 1

Use the information below to answer the following question(s).
Craft 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 non-detectable materials defects. Inspection occurs at the end of the process. Spoiled units generally constitute 5 percent of the good units. Data for December are as follows:


-What is the number of total spoiled units?

A) 1,600 units
B) 2,000 units
C) 2,700 units
D) 3,600 units
E) 4,500 units

Answer 1

3,600 units

Question 2

Use the information below to answer the following question(s).
Craft 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 non-detectable materials defects. Inspection occurs at the end of the process. Spoiled units generally constitute 5 percent of the good units. Data for December are as follows:


-Normal spoilage totalled

A) 1,600 units.
B) 2,000 units.
C) 2,700 units.
D) 1,920 units.
E) 1,700 units.

Answer 2

1,920 units.

Question 3

Use the information below to answer the following question(s).
Craft 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 non-detectable materials defects. Inspection occurs at the end of the process. Spoiled units generally constitute 5 percent of the good units. Data for December are as follows:


-Abnormal spoilage totalled

A) 1,600 units.
B) 2,000 units.
C) 1,680 units.
D) 1,920 units.
E) 1,700 units.

Answer 3

1,680 units.

Question 4

Marble Shop manufactures marble 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 totalled $420,000 for the month. Work-in-process records revealed that 7,500 tonnes were started in April and that 5,500 tonnes were finished; 500 tonnes 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 are the costs assigned to completed units when spoilage units are recognized and when they are not recognized in the cost per equivalent unit?
b. What are the costs transferred out if spoilage units are recognized and if they are ignored?
c. What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized and when spoilage units are ignored?

Question 5

The Clay Shop 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 $310,000 for the month. Work-in-process records revealed that 5,000 kilograms were started in
April and that 3,000 kilograms were finished; 1,000 kilograms 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 are the costs assigned to completed units when spoilage units are recognized and when they are not recognized in the cost per equivalent unit?
b. What are the costs transferred out if spoilage units are recognized and if they are ignored?
c. What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized and when spoilage units are ignored?

Question 6

The Joe's 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 $155,000 for the month. Work-in-process records revealed that 2,500 tons were started in April and that 1,500 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 are the costs assigned to completed units when spoilage units are recognized and when they are not recognized in the cost per equivalent unit?
b. What are the costs transferred out if spoilage units are recognized and if they are ignored?
c. What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized and when spoilage units are ignored?

Question 7

Redwing Shoes manufactures shoes. All direct materials are included at the inception of the production process. For March there were 2,000 units in beginning inventory with a direct material cost of $1,000. Direct materials totalled $20,000 for the month. Work-in-process records revealed that 40,000 shoes were started in March and that 36,000 were finished. Normal spoilage of 5 percent of units finished was incurred. Ending work-in-process units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. Redwing uses the weighted-average method.
Required:
a. What are the costs assigned to completed units when spoilage units are recognized and when they are not recognized in the cost per equivalent unit?
b. What are the costs transferred out if spoilage units are recognized and if they are ignored?
c. What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized and when spoilage units are ignored?

Question 8

Endicott Shoes manufactures shoes. All direct materials are included at the inception of the production process. For March, there were 1,400 units in beginning inventory with a direct material cost of $700. Direct materials totaled $15,000 for the month. Work-in-process records revealed that 35,000 units were started in March and that 30,000 were finished. Normal spoilage of 2% of units finished was incurred. Ending work-in-process units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. Endicott uses the weighted-average method.
Required:
a. What are the costs assigned to completed units when spoilage units are recognized and when they are not recognized in the cost per equivalent unit?
b. What are the costs transferred out if spoilage units are recognized and if they are ignored?
c. What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized and when spoilage units are ignored?

Question 9

Busy Hands Craft Company is a small manufacturing company that specialized 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 had 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.

Question 10

Harriette has been reviewing the accounting system for her company and is very concerned about the accounting for spoilage. It appears that spoilage is accounted for only at the end of the processing cycle. While this concept is acceptable in general, Harriette believes that a better method can be found to properly account for the spoilage when it occurs. She believes that there must be something better than the weighted-average method of accounting for spoilage. She would like the company to use a method that provides closer tracking of the spoilage with the accounting for the spoilage.
Required:
Discuss the problems Harriette is having with the accounting system.

Question 11

For each of the following items identify whether it is spoilage, reworked units, or scrap.

-Defective jeans sold as seconds

A) scrap
B) spoilage
C) spoilage and rework

Question 12

For each of the following items identify whether it is spoilage, reworked units, or scrap.

-Shavings

A) scrap
B) spoilage
C) spoilage and rework

Question 13

For each of the following items identify whether it is spoilage, reworked units, or scrap.

-Edges from plastic moldings

A) scrap
B) spoilage
C) spoilage and rework

Question 14

For each of the following items identify whether it is spoilage, reworked units, or scrap.

-Carpets sold as seconds

A) scrap
B) spoilage
C) spoilage and rework

Question 15

For each of the following items identify whether it is spoilage, reworked units, or scrap.

-Precision tools that are not built successfully to the necessary tolerance, but which can be successfully converted to a saleable product

A) scrap
B) spoilage
C) spoilage and rework

Question 16

Use the information below to answer the following question(s).
Craft 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 non-detectable materials defects. Inspection occurs at the end of the process. Spoiled units generally constitute 5 percent of the good units. Data for December are as follows:


-What is the total cost per equivalent unit using the weighted-average method of process costing?

A) $3.00
B) $3.60
C) $4.60
D) $6.60
E) $6.90

Question 17

Use the information below to answer the following question(s).
Craft 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 non-detectable materials defects. Inspection occurs at the end of the process. Spoiled units generally constitute 5 percent of the good units. Data for December are as follows:


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

A) $18,720; $24,000
B) $22,900; $19,820
C) $24,000; $18,720
D) $28,560; $14,160
E) $33,650; $14,140

Question 18

Use the information below to answer the following question(s).
Cartwright Custom Carpentry manufactures chairs in its Processing Department, and uses the FIFO cost flow assumption. 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 at the end of the process, and spoiled units generally constitute 3 percent of the good output. Information provided for March is as follows:


-What are the normal and abnormal spoilage units, respectively, for March?

A) 2,580 units; 1,420 units
B) 1,950 units; 1,390 units
C) 1,690 units; 1,050 units
D) 1,420 units; 2,580 units
E) 1,140 units; 1,140 units

Question 19

Use the information below to answer the following question(s).
Cartwright Custom Carpentry manufactures chairs in its Processing Department, and uses the FIFO cost flow assumption. 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 at the end of the process, and spoiled units generally constitute 3 percent of the good output. Information provided for March is as follows:


-What are the costs per equivalent unit for direct materials and conversion respectively?

A) $2.00; $1.54
B) $1.45; $1.54
C) $2.11; $1.62
D) $2.11; $1.18
E) $2.00; $1.18

Question 20

Use the information below to answer the following question(s).
Cartwright Custom Carpentry manufactures chairs in its Processing Department, and uses the FIFO cost flow assumption. 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 at the end of the process, and spoiled units generally constitute 3 percent of the good output. Information provided for March is as follows:


-What costs are allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively?

A) $28,250; $24,850
B) $30,000; $23,100
C) $30,000; $21,590
D) $39,500; $13,600
E) $40,000; $23,100

Question 21

Use the information below to answer the following question(s).
Cartwright Custom Carpentry manufactures chairs in its Processing Department, and uses the FIFO cost flow assumption. 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 at the end of the process, and spoiled units generally constitute 3 percent of the good output. Information provided for March is as follows:


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

A) $5,890.64; $9,133.20
B) $5,890.64; $5,826.00
C) $6,469.64; $7,690.36
D) $7,690.36; $5,026.80
E) $9,133.20; $5,026.80

Question 22

Which of the following journal entries correctly represents the transfer of completed goods for the current period using the FIFO method of process costing?

A)

B)

C)

D)

E)

Question 23

Boss Cycle generally has spoiled goods during each job. Costs are assigned to normal spoilage at $10.00 per unit and abnormal spoilage at $20.00 per unit. Disposal fees typically run $5.00 per item. Boss Cycle has a policy never to rework spoiled units. Management believes that once a unit is damaged it cannot be reworked into a quality product. The losses are charged back to the specific job.
What is the appropriate journal entry if 300 units are considered abnormal spoilage and are not disposed of in a process costing system?

A)

B)

C)

D)

E)

Question 24

Answer the following question(s) using the information below.
Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are added at the beginning of the process and conversion costs are incurred evenly throughout the production cycle. Inspection takes place at the end of the process and spoiled units generally constitute 4% of the good units. Data provided for February are as follows:


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

A) $12,571; $30,108
B) $30,108; $12,571
C) $1,257; $3,010
D) $8,000; $4,000
E) $10,627; $25,453

Question 25

Answer the following question(s) using the information below.
Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are added at the beginning of the process and conversion costs are incurred evenly throughout the production cycle. Inspection takes place at the end of the process and spoiled units generally constitute 4% of the good units. Data provided for February are as follows:


-What costs are allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively, using the FIFO method of process costing?

A) $38,250; $4,850
B) $40,000; $23,100
C) $38,400; $4,950
D) $49,500; $38,400
E) $38,400; $19,800

Question 26

What are the direct materials and conversion costs of all the units that were started and completed during February?

A) $314,280
B) $217,280
C) $318,160
D) $153,500
E) $143,360

Question 27

Answer the following question(s) using the information below:
Hawk Ltd. uses process costing in its Fabricating Department. At the beginning of October, it had 12,000 units in beginning work-in-process that were 40% complete with respect to conversion. During October it put 87,000 units into production and completed 89,000 good units. At October 31, there were 3,000 units in ending work-in-process that were 70% complete with respect to conversion. Direct materials are added at the beginning of the process. Inspection occurs at the end of the process and normal spoilage is 6% of good output.
Costs related to the beginning inventory were $36,800 for direct materials and $28,600 for conversion costs. During the month, the company issued $280,000 of direct materials and incurred $599,400 of conversion costs.

-What are the normal and abnormal spoilage units, respectively, for October assuming Hawk uses the weighted average method of process costing?

A) 5,340 units; 1,660 units
B) 7,000 units; 1,660 units
C) 5,220 units; 1,780 units
D) 5,340 units; 1,780 units
E) 5,940 units; 1,060 units

Question 28

Answer the following question(s) using the information below:
Hawk Ltd. uses process costing in its Fabricating Department. At the beginning of October, it had 12,000 units in beginning work-in-process that were 40% complete with respect to conversion. During October it put 87,000 units into production and completed 89,000 good units. At October 31, there were 3,000 units in ending work-in-process that were 70% complete with respect to conversion. Direct materials are added at the beginning of the process. Inspection occurs at the end of the process and normal spoilage is 6% of good output.
Costs related to the beginning inventory were $36,800 for direct materials and $28,600 for conversion costs. During the month, the company issued $280,000 of direct materials and incurred $599,400 of conversion costs.

-Assuming Hawk uses the weighted-average method for process costing, the equivalent units for direct materials and conversion for October are

A) 89,000 units; 88,100 units.
B) 87,000 units; 93,300 units.
C) 82.000 units; 91.100 units.
D) 99,000 units; 98,100 units.
E) 92,000 units; 90,200 units.

Question 29

Answer the following question(s) using the information below:
Hawk Ltd. uses process costing in its Fabricating Department. At the beginning of October, it had 12,000 units in beginning work-in-process that were 40% complete with respect to conversion. During October it put 87,000 units into production and completed 89,000 good units. At October 31, there were 3,000 units in ending work-in-process that were 70% complete with respect to conversion. Direct materials are added at the beginning of the process. Inspection occurs at the end of the process and normal spoilage is 6% of good output.
Costs related to the beginning inventory were $36,800 for direct materials and $28,600 for conversion costs. During the month, the company issued $280,000 of direct materials and incurred $599,400 of conversion costs.

-Assuming Hawk uses the FIFO method of process costing, the equivalent units for direct materials and conversion costs respectively for October are

A) 87,000 units; 93,300 units.
B) 87,000 units; 94,200 units.
C) 80,000 units; 86,300 units.
D) 87,000 units; 90,900 units.
E) 99,000 units; 94,200 units.

Question 30

Answer the following question(s) using the information below:
Hawk Ltd. uses process costing in its Fabricating Department. At the beginning of October, it had 12,000 units in beginning work-in-process that were 40% complete with respect to conversion. During October it put 87,000 units into production and completed 89,000 good units. At October 31, there were 3,000 units in ending work-in-process that were 70% complete with respect to conversion. Direct materials are added at the beginning of the process. Inspection occurs at the end of the process and normal spoilage is 6% of good output.
Costs related to the beginning inventory were $36,800 for direct materials and $28,600 for conversion costs. During the month, the company issued $280,000 of direct materials and incurred $599,400 of conversion costs.

-Assuming Hawk uses the FIFO method of process costing, the cost of the ending work-in-process inventory is

A) $23,040.
B) $23,142.
C) $28,800.
D) $28,920.
E) $19,200.

Question 31

Answer the following questions using the information below:
Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some fillets are spoiled due to nondetectible defects. Inspection occurs when units are 50% converted. Spoiled fillets generally constitute 3.5% of the good fillets. Data for April 2015 are as follows:


-What is the number of total spoiled units?

A) 16,000 units
B) 10,000 units
C) 50,000 units
D) 14,000 units
E) 7,000 units

Question 32

Answer the following questions using the information below:
Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some fillets are spoiled due to nondetectible defects. Inspection occurs when units are 50% converted. Spoiled fillets generally constitute 3.5% of the good fillets. Data for April 2015 are as follows:


-What is the total cost per equivalent unit using the weighted-average method of process costing?

A) $4.00
B) $1.74
C) $2.10
D) $3.84
E) $3.74

Question 33

Answer the following questions using the information below:
Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some fillets are spoiled due to nondetectible defects. Inspection occurs when units are 50% converted. Spoiled fillets generally constitute 3.5% of the good fillets. Data for April 2015 are as follows:


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

A) $6,720; $27,840
B) $27,840; $6,720
C) $27,840; $33,600
D) $33,600; $27,840
E) $633,600; $6,720

Question 34

Viking Sports is a manufacturer of sport swear. It produces all of its products in one department. The information for the current month is as follows:

Beginning work-in-process was half complete as to conversion. Direct materials are added at the beginning of the process. Factory overhead is applied at a rate equal to 50 percent of direct manufacturing labour. Ending work-in-process was 60 percent complete. All spoilage is normal and is detected at end of the process.
Required:
Prepare a production cost worksheet assuming that spoilage is recognized and the weighted-average method is used.

Question 35

The Skate Board Company uses a process cost system for making skateboard wheels. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of September the work-in-process is 40 percent complete and at the end of the month it is 60 percent complete. Spoilage is detected at the end of the process. Other data for the month include:


Required:
a. Prepare a production cost worksheet assuming that spoilage is recognized and the weighted-average method is used.
b. Prepare journal entries to record transferring out of cost from the work-in-process accounts.

Question 36

The Skate Board Company uses a process cost system for making skateboard wheels. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of September the work-in-process is 40 percent complete and at the end of the month it is 60 percent complete. Spoilage is detected at the end of the process. Other data for the month include:
Beginning work-in-process inventory 1,600 units
Units started 20,000 units
Units placed in finished goods 12,000 units
Ending work-in-process inventory 1,200 units
Normal spoilage % on all units finished 20 percent
Conversion costs $40,320
Cost of direct materials $40,000
Beginning work-in-process costs:
Materials $4,000
Conversion $4,032
Required:
a. Prepare a production cost worksheet assuming that spoilage is recognized and the FIFO method is used.
b. Prepare journal entries to record transferring out of cost from the work-in-process accounts.

Question 37

Wilson Sports uses a process costing system. Direct material A is placed into production at the beginning of the process, while direct material B is placed into production at the end of the process. Inspection occurs at the end of the process, before the addition of direct material B. Normal spoilage is 5% of good units. For March the company had the following activities:

Required:
Prepare a production cost worksheet assuming that spoilage is recognized and the weighted-average method is used.

Question 38

Weather Instruments assembles products from component parts. It has two departments that process all products. During January the beginning work-in-process in the assembly department was half completed as to conversion and complete as to direct materials. The beginning inventory included $12,000 for materials and $4,000 for conversion costs. Overhead is applied at the rate of 50 percent of direct manufacturing labour costs. Ending work-in-process inventory in the assembly department was 40 percent complete. All spoilage is considered normal and is detected at the end of the process. Beginning work-in-process in the finishing department was 75 percent complete as to conversion and ending work-in-process was 25 percent converted. Direct materials are added at the end of the process. Beginning inventories included $16,000 for transferred-in costs and $20,000 for conversion costs. Overhead in this department is equal to direct manufacturing labour costs. Additional information about the two departments follows:

Required:
Prepare a production cost worksheet using weighted-average for the assembly department and FIFO for the finishing department assuming that spoilage is recognized.

Question 39

Dutton Industries is a manufacturer of cleaning products. Its main product goes through two departments: Mixing and Bottling. During June, the beginning WIP in the Mixing department was 32% complete as to conversion cost. The beginning inventory included $15,200 for materials and $19,800 for conversion costs. Ending WIP in the Mixing department was 80% complete. All direct materials are added at the beginning of the process in each department. Inspection occurs at the end of the process in both departments. Normal spoilage is 2.5% of good output in Mixing and 1.4% of good output in Bottling. Beginning WIP in Bottling was 60% complete with respect to conversion costs and ending WIP was 30% converted. Beginning WIP included $8,850 for direct materials, $72,200 for transferred in costs and $23,800 for conversion costs. Additional information follows:

Required:
Prepare a production cost worksheet using weighted-average for the Mixing department and FIFO for the Bottling department assuming that spoilage is recognized.

Question 40

Playtime Ltd. manufactures toys in two departments: Forming and Finishing. During August, the beginning WIP in the Forming Department was 38% complete with respect to conversion, direct materials are added at the beginning of the process. The beginning inventory in Forming included $36,400 for materials and $9,400 for conversion costs. Ending WIP in the Forming department was 70% complete. In the second department, Finishing, direct materials are added at the end of the process. Beginning WIP in Finishing was 22% complete with respect to conversion costs and ending WIP was 85% converted. Beginning WIP included $35,200 for transferred in costs and $12,350 for conversion costs. Additional information follows:
Required:
Prepare a production cost worksheet using weighted-average for the Forming department and FIFO for the Finishing department assuming the spoilage is recognized.

Question 41

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:

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 37.5% of direct manufacturing labour. 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.

Question 42

Springfield Sign Shop manufactures only specific orders. It uses a standard cost system. During one large order for the transit authority, an unusual number of signs were spoiled. The normal spoilage rate is 10% of units started. The point of first inspection is half way through the process, the second is three-fourths through the process, and the final inspection is at the end of the process. Other information about the job is as follows:

Required:
Make necessary journal entries to record all transactions related to the transit authority job.

Question 43

Hogan Ltd. uses a standard cost system in its manufacturing process. During a recent job, it noticed that its spoilage rate was high. Normal spoilage rate averages 8% of units started. Direct materials are added at the beginning of the process. Inspection occurs at the 75% point. Other information about the job follows:

Spoiled units have no salvage value.
Required:
Make necessary journal entries to record all spoilage.

Question 44

Intelligent Composite Materials Inc. is a manufacturer of advanced composites that can be formed electronically. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of the product XJ1 are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value. The company uses standard costs with $300 per equivalent unit for direct materials, and $90 per equivalent unit for conversion costs for both beginning work-in-process inventory and work done during the period. Summary data for the month of July follow:
Required:
a. Prepare a production cost report assuming the spoilage is recognized.
b. Prepare the necessary journal entry to record abnormal spoilage.

Question 45

Boss Manufacturing generally has spoiled goods during each job. Costs are assigned to normal spoilage at $10.00 per unit and abnormal spoilage at $20.00 per unit. Boss has a policy never to rework spoiled units. Management believes that once a unit is damaged it cannot be reworked into a quality product.
What is the appropriate journal entry if 500 units are considered abnormal spoilage in a job costing system?

A)

B)

C)

D)

E)

Question 46

The Hawg Manufacturing Shop produces motorcycle parts. Typically, 20 pieces out of a job lot of 2,000 parts are normally spoiled. Costs are assigned at the inspection point, $100.00 per unit. Spoiled pieces may be disposed of for proceeds of $20.00 per unit. The spoiled goods must be inventoried appropriately when the normal spoilage is detected. The current job requires the production of 5,000 good parts.
Which of the following journal entries properly reflects the recording of spoiled goods?

A)

B)

C)

D)

E)

Question 47

A company manufactures draperies. Because of strict production specifications, the manufacturing department often has spoiled items. If the spoiled items are under 10 percent of a job's total items they are treated as normal spoilage. During February job 101 for 200 draperies had 16 spoiled items. The spoiled items were detected immediately before they were packaged. They had already passed the safety inspection. The marketing manager believes the items can be sold for $280 each. They had a cost at point of detection of $600 each. These costs included $300 for direct manufacturing labour, $200 for direct materials, and $100 for factory overhead.
Required:
a. Make the necessary journal entry, or entries, to record the spoiled units if the spoilage is normal and assigned to an overhead control account.
b. Make the necessary journal entry, or entries, to record the spoiled units if the spoilage is assigned to job 101.

Question 48

A company manufactures leather jackets. Because of strict production specifications, the manufacturing department often has spoiled items. If the spoiled items are under 5 percent of a job's total items they are treated as normal spoilage. During February job 301 for 200 jackets had 8 spoiled items. The spoiled items were detected immediately before they were packaged. They had already passed the safety inspection. The marketing manager believes the items can be sold for $150 each. They had a cost at point of detection of $500 each. These costs included $250 for direct manufacturing labour, $200 for direct materials, and $50 for factory overhead.
Required:
a. Make the necessary journal entry, or entries, to record the spoiled units if the spoilage is normal and assigned to an overhead control account.
b. Make the necessary journal entry, or entries, to record the spoiled units if the spoilage is assigned to job 101.

Question 49

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?

Question 50

Which of the following entries reflects the original cost assignment before production items are reworked?

A)

B)

C)

D)

E)

Question 51

Which of the following entries would correctly record costs associated with reworked items?

A)

B)

C)

D)

E)

Question 52

When abnormal rework is distinguished from normal rework, and charged to a separate loss account, which of the following is a likely result?

A) Prices will have to increase on the company's products accordingly.
B) The amount of normal spoilage unfavourable efficiency variances will be less.
C) The amount of normal spoilage unfavourable efficiency variances will be more.
D) The amount of normal spoilage unfavourable efficiency variances will be unchanged.
E) The abnormal spoilage variance will be closed to cost of goods manufactured.

Question 53

Which of the following journal entries could appropriately record the cash sale of scrap?

A)

B)

C)

D)

E)

Question 54

Answer the following questions using the information below:
Jansen Corporation uses job costing in its' metal fabrication plant. During February Job 117 was completed and the scrap generated was not usable by other jobs. Job 124 was also completed in February and the scrap created was usable by other jobs.

-Which journal entry correctly records the sale of scrap from Job 117 for $250?

A)

B)

C)

D)

E)

Question 55

Answer the following questions using the information below:
Jansen Corporation uses job costing in its' metal fabrication plant. During February Job 117 was completed and the scrap generated was not usable by other jobs. Job 124 was also completed in February and the scrap created was usable by other jobs.

-Which of the following is the correct journal entry if Job 124 created scrap that is common to all jobs?

A)

B)

C)

D)

E)

Question 56

Answer the following questions using the information below:
Jansen Corporation uses job costing in its' metal fabrication plant. During February Job 117 was completed and the scrap generated was not usable by other jobs. Job 124 was also completed in February and the scrap created was usable by other jobs.

-Which of the following is the correct journal entry if the scrap created by Job 124 is subsequently used by another job?

A)

B)

C)

D)

E)

Question 57

Boutin Company uses a job costing system. During October, the following costs are incurred on Job 110 to manufacture 200 motors:

Required:
a. Prepare the journal entry to record the rework costs, assuming the rework is attributable specifically to Job 110.
b. Compute the cost per finished motor for Job 110, assuming the rework is attributable specifically to this job.
c. Prepare the journal entry to record the rework costs, assuming the rework is common to all jobs.
d. Compute the cost per finished motor for Job 110, assuming the rework is common to all jobs.

Question 58

Carriage Florists operate a flower shop. Because most of the orders are via telephone, fax or email, numerous orders have to be reworked. The average cost of the reworked orders is $4: $2.50 for labour, $1 for more flowers, and $0.50 for overhead. This ratio of costs holds for the average original order and includes a provision for rework common to all jobs. On a recent day the shop reworked 32 orders out of 166. The original cost of the 32 orders totalled $480. The average cost of all orders is $12.50, including rework, with an average selling price of $20.
Required:
Prepare the necessary journal entry, or entries, 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.

Question 59

Dad's Bottling Company often has bottles that do not meet customer specifications although it does not allow for spoilage. Some of the rejects are immediately crushed and recycled while others are held for future use in other jobs. During May the company had bottles costing $1,000 that were recycled and $1,600 worth of bottles that were placed into finished goods inventory for later sale; these bottles were sold in June for $2,000.
Required:
Record the journal entries associated with the above activities. Assume saleable scrap items are returned to inventory when rejected during inspection.

Question 60

Robotoys Incorporated manufactures and distributes small robotic toys. Reworked units are common. The average cost of the reworked orders is $11.30: $4.15 for labour, $5.00 for more materials, and $2.15 for overhead. This ratio of costs holds for the average original order. On a recent day, the shop reworked 83 orders out of 700. The original cost of the 83 orders totaled $1,909. The average cost of all orders is $24.34, including rework, with an average selling price of $34.50.
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.

Question 61

Bluefish Machine Shop is a manufacturer of motorized cars for golf clubs. Leona Pez, the plant manager of Bluefish, obtained the following information for Job 99 in July 2015. A total of 50 units were started, and 3 spoiled units were detected and rejected at final inspection. The spoiled units were considered to be normal spoilage. Costs prior to the inspection point are $1,200 per unit. The current disposal price of the spoiled units is $600 per unit. When spoilage is detected, the spoiled units are inventoried at $600 per unit.
Required:
1. Prepare journal entries to record the normal spoilage, assuming:
a. The spoilage is related to a specific job.
b. The spoilage is common to all jobs.
c. The spoilage is considered to be abnormal spoilage.
2. Assume that 2 spoiled units can be reworked for a total cost of $800. A total cost of $2,400 associated with these units has already been assigned to job 99 before the rework. Prepare journal entries for the rework assuming:
a. The rework is related to a specific job.
b. The rework is common to all jobs.
c. The rework is considered to be abnormal.

Question 62

Marvin Randall had a background in the manufacturing of building bricks. The building brick industry used clay and other material which were first mixed, then aged. After aging, they were molded into shapes, retouched and fired in kilns. The materials were fairly durable and spoilage was not significant. As a result, any spoilage that did occur was not specifically accounted for. Marvin saw the similarities between brick and tile manufacturing and felt that he could apply his knowledge successfully in tile manufacturing and started his business, Randall Tile Ltd. on July 1.
In tile manufacturing, as it brick manufacturing, the process starts with the selection of the raw materials including clays. However feldspar, sand, and other materials are used. In the initial stages, it is important that all materials are homogenized; this is done through a wet grinding process. The material output of this process is known as slip.
Water content is then removed from the slip through spray-drying . After, the material is moulded , pressed and dried before the tiles are fired. Hydraulic presses are used to guarantee maximum compaction. Consistency in the press cycle time is critical to ensure the tiles have the correct moisture content. If the water content is too high, the tiles will crack or break.
Unglazed tiles proceed to firing, whereas glazed tiles must first be covered with one or more layers of glaze. Firing time and temperature are important in the firing process to ensure the resulting product meets required specifications for strength, stability, resistance and easy cleaning.
After firing, tiles are inspected for quality. Irregularities in size, shape or colouring will lead to spoiled units. The final step is packing the ceramic tiles.
Randall Tile was organized into 4 main departments.: 1) Mixing & Grinding, 2) Moulding & Pressing, 3) Glazing & Firing and 4) Inspecting & Packing. Randall was not manufacturing many glazed tiles, so any glazing that was required was done in the Firing department. The weighted average method of process costing was used in each department, however spoilage was not tracked. Marvin quickly realized that, although the processes in brick and tile manufacturing processes were similar, tile manufacturing required much more precision. After 3 months of operations, he estimated that he had a 50% defect rate when considering all stages of manufacturing. Employees were frustrated by the constant changes in manufacturing as pressing times, firing times, and temperatures were all altered in attempts to improve quality. Furthermore, Marvin believed that both frustration and nervousness led to high spoilage in the packing process.
Required:
What factors might have contributed to the high defect rate that Marvin noted? What steps might Marvin have taken prior to starting production to minimize defects? What recommendations would you make to Marvin regarding the management accounting system at Randall Tile?