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Exam 18: Spoilage, Rework, and Scrap

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Question 71

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

A)
B)
C)
D)
E)

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Question 72

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When normal spoilage is detected, the work-in-process control account is debited in a job costing system.

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Question 73

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Which of the following statements is FALSE?

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.

Scrap has no value (or minimal value)therefore it is not traced back to specific jobs.

Normal spoilage is usually computed on the basis of

For each of the following items identify whether it is spoilage, reworked units, or scrap. A)spoilage B)spoilage and rework -Rock extracted as a result of mining processing

One of the major aspects of accounting for scrap is inventory costing, which includes when and how scrap affects operating income.

Explain the meaning of the terms spoilage, scrap, and rework.Provide an example of each.Is it possible for a single firm to have all three from a single productive process?

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.

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?

Assume the amount of scrap is material and the scrap is sold immediately after it is produced.If the scrap attributable to a specific job is sold on account, the journal entry is

Which of the following is NOT a consideration when accounting for scrap?

An example of rework is when a shoe manufacturer uses leftover leather from shoes to make leather watch bands.

The last step in the five-step procedure for process costing with spoilage is to summarize total costs to account for.

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

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: -Using the FIFO method of process costing, what are the total costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped?

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?

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: -The goal of separately identifying abnormal spoilage is to

How can a company account for scrap? Include in your explanation a discussion of the two aspects of accounting for scrap.