To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com CHAPTER 18 SPOILAGE, REWORK, AND SCRAP 18-1 Managers have found that improved quality and intolerance for high spoilage have lowered overall costs and increased sales. 18-2 Spoilage—units of production that do not meet the standards required by customers for good units and that are discarded or sold at reduced prices. Rework—units of production that do not meet the specifications required by customers but which are subsequently repaired and sold as good finished units. Scrap—residual material that results from manufacturing a product. It has low total sales value compared to the total sales value of the product. 18-3 Yes. Normal spoilage is spoilage inherent in a particular production process that arises even under efficient operating conditions. Management decides the spoilage rate it considers normal depending on the production process. 18-4 Abnormal spoilage is spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions. Costs of abnormal spoilage are “lost costs,” measures of inefficiency that should be written off directly as losses for the accounting period. 18-5 Management effort can affect the spoilage rate. Many companies are relentlessly reducing their rates of normal spoilage, spurred on by competitors who, likewise, are continuously reducing costs. 18-6 Normal spoilage typically is expressed as a percentage of good units passing the inspection point. Given actual spoiled units, we infer abnormal spoilage as follows: Abnormal spoilage = Actual spoilage – Normal spoilage. 18-7 Accounting for spoiled goods deals with cost assignment, rather than with cost incurrence, because the existence of spoiled goods does not involve any additional cost beyond the amount already incurred. 18-8 Yes. Normal spoilage rates should be computed from the good output or from the normal input, not the total input. Normal spoilage is a given percentage of a certain output base. This base should never include abnormal spoilage, which is included in total input. Abnormal spoilage does not vary in direct proportion to units produced, and to include it would cause the normal spoilage count to fluctuate irregularly and not vary in direct proportion to the output base. 18-9 Yes, the point of inspection is the key to the assignment of spoilage costs. Normal spoilage costs do not attach solely to units transferred out. Thus, if units in ending work in process have passed inspection, they should have normal spoilage costs added to them. 18-10 No. If abnormal spoilage is detected at a different point in the production cycle than normal spoilage, then unit costs would differ. If, however normal and abnormal spoilage are detected at the same point in the production cycle, their unit costs would be the same. 18- To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 18-11 No. Spoilage may be considered a normal characteristic of a given production cycle. The costs of normal spoilage caused by a random malfunction of a machine would be charged as a part of the manufacturing overhead allocated to all jobs. Normal spoilage attributable to a specific job is charged to that job. 18-12 No. Unless there are special reasons for charging normal rework to jobs that contained the bad units, the costs of extra materials, labor, and so on are usually charged to manufacturing overhead and allocated to all jobs. 18-13 Yes. Abnormal rework is a loss just like abnormal spoilage. By charging it to manufacturing overhead, the abnormal rework costs are spread over other jobs and also included in inventory to the extent a job is not complete. Abnormal rework is rework over and above what is expected during a period, and is recognized as a loss for that period. 18-14 A company is justified in inventorying scrap when its estimated net realizable value is significant and the time between storing it and selling or reusing it is quite long. 18-15 Companies measure scrap to measure efficiency and to also control a tempting source of theft. Managers of companies that report high levels of scrap focus attention on ways to reduce scrap and to use the scrap the company generates more profitably. Some companies, for example, might redesign products and processes to reduce scrap. Others may also examine if the scrap can be reused to save substantial input costs. 18-16 (5–10 min.) Normal and abnormal spoilage in units. 1. Total spoiled units Normal spoilage in units, 5% 132,000 Abnormal spoilage in units 2. Abnormal spoilage, 5,400 $10 Normal spoilage, 6,600 $10 Potential savings, 12,000 $10 12,000 6,600 5,400 $ 54,000 66,000 $120,000 Regardless of the targeted normal spoilage, abnormal spoilage is non-recurring and avoidable. The targeted normal spoilage rate is subject to change. Many companies have reduced their spoilage to almost zero, which would realize all potential savings. Of course, zero spoilage usually means higher-quality products, more customer satisfaction, more employee satisfaction, and various beneficial effects on nonmanufacturing (for example, purchasing) costs of direct materials. 18- To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com 18-17 (20 min.) Weighted-average method, spoilage, equivalent units units. Solution Exhibit 18-17 calculates equivalent units of work done to date for direct materials and conversion costs. SOLUTION EXHIBIT 18-17 Summarize Output in Physical Units and Compute Output in Equivalent Units; Weighted-Average Method of Process Costing with Spoilage, Gray Manufacturing Company for November 2009. (Step 1) Physical Units Flow of Production Work in process, beginning (given) Started during current period To account for Good units completed and transferred out during current period: Normal spoilage* 100 100%; 100 100% Abnormal spoilage† 50 100%; 50 100% Work in process, ending‡ (given) 2,000 100%; 2,000 30% Accounted for Work done to date (Step 2) Equivalent Units Direct Conversion Materials Costs 1,000 10,150a 11,150 9,000 100 9,000 9,000 100 100 50 50 2,000 600 11,150 9,750 50 2,000 11,150 a From below, 11,150 total units are accounted for. Therefore, units started during current period must be = 11,150 – 1,000 = 10,150. *Degree of completion of normal spoilage in this department: direct materials, 100%; conversion costs, 100%. †Degree of completion of abnormal spoilage in this department: direct materials, 100%; conversion costs, 100%. ‡Degree of completion in this department: direct materials, 100%; conversion costs, 30%. 18- 96) (50# $1.com 18-18 (2025 min. Weighted-Average Method of Process Costing.) Weighted-average method. and assigns total costs to units completed and transferred out (including normal spoilage). and to Units in Ending Work in Process.22) + (50# $2. ebook.000# $1. out 38.To download more slides.423 39. SOLUTION EXHIBIT 18-18 Summarize Total Costs to Account For.96 (Step 5) Assignment of costs Good units completed and transferred out (9.000# $2. assigning costs (continuation of 18-17).860 9.96) (2.000 units) 4. Total Production Direct Costs Materials $ 2. visit http://downloadslide.463 $13.150 $ 1.22 $28. ending (2.860 $13.22) + (100# $2.860 .603 11.038 (B) Abnormal spoilage (50 units) 209 (C) Work in process. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit Conversion Costs $ 1.533 $ 1.750 $ 2. 18- $28. solutions and test bank. calculates the costs per equivalent unit for direct materials and conversion costs.000 units) Costs before adding normal spoilage $37. to abnormal spoilage.620 Normal spoilage (100 units) 418 (A) Total cost of good units completed & transf. November 2009.930 12. Solution Exhibit 18-18 summarizes total costs to account for. and Assign Total Costs to Units Completed.750 $28.216 (A)+(B)+(C) Total costs accounted for $42.96) $13.22) + (9.110 27.96) (100# $1. Gray Manufacturing Company.603 (Step 3) Work in process.blogspot.22) + (600# $2. Compute Cost per Equivalent Unit.000# $1. to Spoiled Units. and to units in ending work in process.463 #Equivalent (9.180 $42.603 + units of direct materials and conversion costs calculated in Step 2 in Solution Exhibit 18-17. conversion costs. 30%.000 0 500 1.com 18-19 (15 min. visit http://downloadslide. equivalent units.150.000 (100% 50%) 8. conversion costs.150 – 1. ‡Degree of completion in this department: direct materials. #9. ||Degree of completion in this department: direct materials. conversion costs. units started during current period must be 11. Gray Manufacturing Company for November 2009.000 8.000 = 10.000 physical units completed and transferred out minus 1. 11. beginning (given) Started during current period To account for Good units completed and transferred out during current period: From beginning work in process|| 1. First-in.000 100%.blogspot. 8. ending ‡ 2. 1.) FIFO method. 100%.000# Started and completed 8.150 Accounted for 10. 50 100% 2. (Step 1) Physical Units 1. 2.To download more slides. 100%. 100 100% 50 Abnormal spoilage† 50 50 50 100%.000 30% 11. 100%. First-out (FIFO) Method of Process Costing with Spoilage.000 100% 100 Normal spoilage* 100 100 100 100%. solutions and test bank.150a 11.000 600 ____ 2. spoilage.000 8. 50%.150 9. 100%. Therefore. conversion costs. *Degree of completion of normal spoilage in this department: direct materials.250 Work done in current period only a From below.000 (100% 100%). 100%.150 total units are accounted for.000 10.000 100%. ebook.000 physical units completed and transferred out from beginning work-in-process inventory. †Degree of completion of abnormal spoilage in this department: direct materials.000 Work in process. 100%.150 (Step 2) Equivalent Units Direct Conversion Materials Costs Flow of Production Work in process. 18- . SOLUTION EXHIBIT 18-19 Summarize Output in Physical Units and Compute Output in Equivalent Units. Solution Exhibit 18-19 calculates equivalent units of work done in the current period for direct materials and conversion costs. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (8.To download more slides.000a $1. beginning (1.20) + $1.463 $13.110 27. and to units in ending work in process.000 units) (A)+(B)+(C ) Total costs accounted for a Equivalent $12. assigning costs (continuation of 18-19).000 units) Costs added to beg. and assigns total costs to units completed and transferred out (including normal spoilage). calculates the costs per equivalent unit for direct materials and conversion costs.423 39.533 $ 1.20 $ 2.000a $3) (100a $1.860 .20) + (100a $3) (50a $1.250 $ 3 $1. visit http://downloadslide. FIFO Method of Process Costing.930 12. November 2009.533 1. ending (2. SOLUTION EXHIBIT 18-20 Summarize Total Costs to Account For. ebook.500 4.603 (Step 3) Work in process.600 420 38.033 33.) FIFO method.603 + units of direct materials and conversion costs calculated in Step 2 in Solution Exhibit 18-19. to Spoiled Units.150 $ 1.110 (500a $3) (8.750 $28.blogspot.053 210 4.180 10. solutions and test bank.000 units) Normal spoilage (100 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (50 units) (C) Work in process.000a $1.20) + $13.180 $42.423 + (0a $1.463 $27.750 9. Total Production Direct Costs Materials $ 2.20) + (8. to abnormal spoilage. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs added in current period Divided by equivalent units of work done in current period Cost per equivalent unit (Step 5) Assignment of costs: Good units completed and transferred out (9. Solution Exhibit 18-20 summarizes total costs to account for.200 $42. and Assign Total Costs to Units Completed. Gray Manufacturing Company. 18- Conversion Costs $ 1.20) + (2.000 units) Work in process. and to Units in Ending Work in Process.860 (50a $3) (600a $3) $28. Compute Cost per Equivalent Unit.com 18-20 (2025 min. 000 Started during current period (given) 10. 18- .000 + 10.200. Degree of completion of abnormal spoilage in this department: direct materials.350 ______ 12.550 spoilage is 10% of good units transferred out: 10% × 9.9.000 9. endingc (given) 1. 100%.000 a Normal spoilage 900 (900 100%. units + Units started . conversion costs. 75%. Abnormal spoilage = Total spoilage – Normal spoilage = 1. 100%. solutions and test bank. Weighted-Average Method of Process Costing with Spoilage.To download more slides. out during current period: 9.800 100%. conversion costs. 100%.000 Good units completed and tsfd. bTotal spoilage = Beg.com 18-21 (35 min. SOLUTION EXHIBIT 18-21A Summarize Output in Physical Units and Compute Output in Equivalent Units. 300 100%) Work in process. Degree of completion of normal spoilage in this department: direct materials.Good units transferred out – Ending units = 2. Solution Exhibit 18-21A calculates equivalent units of work done in the current period for direct materials and conversion costs. visit http://downloadslide.000 ______ 11.000 = 900 units. ebook. spoilage. beginning (given) 2.000 To account for 12.800 1. cDegree of completion in this department: direct materials. 1.000 900 900 300 300 1. Appleton Company for August 2009. conversion costs.200 – 900 = 300 units.000 . (Step 1) (Step 2) Equivalent Units Physical Direct Conversion Units Materials Costs Flow of Production Work in process. 1.000 9.blogspot. 900 100%) Abnormal spoilageb 300 (300 100%. 100%.000 .800 (1.1.800 = 1. 100%.) Weighted-average method.800 75%) ______ Accounted for Work done to date aNormal 12. 250 $155. Total Production Costs $ 28.900 (Step 3) Work in process.000d $8.550 $ 8. Weighted-Average Method of Process Costing.800d $8.9957 12.9957) $99. ending (1.300 $202.174 26. to Spoiled Units.000 d $8.25) + (9. and Assign Total Costs to Units Completed.blogspot. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divide by equivalent units of work done to date Cost per equivalent unit (Step 5) (A) (B) (C) (A) + (B) + (C) dEquivalent Assignment of costs Good units completed and transferred out (9.com 2. Appleton Company. and to units in ending work in process. and assigns total costs to units completed and transferred out (including normal spoilage).900 ÷11.000 $103.800 units): Total costs accounted for Conversion Costs $ 10.994 $202.9957) (1.350d $8.25) + (300d $8.9957) (300d $8.000 (9.900 . solutions and test bank. ebook.000 $103. Solution Exhibit 18-21B summarizes total costs to account for.521 170.000 + $103. and to Units in Ending Work in Process. using the weighted-average method.211 15. calculates the costs per equivalent unit for direct materials and conversion costs.25) + (900d $8.25) + (1. Compute Cost per Equivalent Unit.700 81.600 174.900 units of direct materials and conversion costs calculated in step 2 of Solution Exhibit 18-21A. 18- Direct Materials $17.732 5.900 $99.To download more slides.9957) (900d $8.300 $99. to abnormal spoilage. visit http://downloadslide. August 2009.000 units) Costs before adding normal spoilage Normal spoilage (900 units) Total costs of good units completed and transferred out Abnormal spoilage (300 units) Work in process. SOLUTION EXHIBIT 18-21B Summarize Total Costs to Account For.900 93.000 $ 8. To download more slides.000 ÷ 10.) Recognition of loss from spoilage.90 × 500 units = $10.000 units = $20. but do not result in finished product. ebook. The journal entry to record the spoilage incurred in Aaron’s production process is: Manufacturing overhead control (normal spoilage) Work-in-process inventory (cost of spoiled sheet metal) 250 250 18-23 (15 min.450 cost for the 500 spoiled units is taken out of manufacturing costs and expensed in the period of the spoilage. The unit cost of making the 10.90 + $1. spoilage. 1. The total cost of the 500 spoiled units is: $20.500 good units = $1. visit http://downloadslide.450 18- . A simple way to account for spoilage in process costing is to calculate the amount of direct material that was spoiled. solutions and test bank.450 ÷ 9.450 Work-in-process control $10. Spoilage represents the amount of resources that go into the process.450 3.com 18-22 (10 min.10 = $22. journal entries.) Standard costing method.90 per unit 2.blogspot. The increase in the per-unit cost of goods sold as a result of the normal spoilage is: $10.10 Unit cost of goods sold for units remaining after the spoilage = $20.000 units is: $209. The $10. 4.00. The journal entry to record the abnormal spoilage incurred is: Loss from abnormal spoilage $10. calculates the costs per equivalent unit for each cost category. conversion costs. ending‡ (given) 450 100%. solutions and test bank. spoilage. summarizes total costs to account for.550 3. ‡Degree of completion in this department: direct materials. Degree of completion of abnormal spoilage in this department: direct materials. ebook. Solution Exhibit 18-24. and assigns total costs to units completed (including normal spoilage).100 315 (Step 2) Equivalent Units Direct Conversion Materials Costs 2. visit http://downloadslide. 100%.150 *Normal spoilage is 15% of good units transferred out: 15% 2. 100%.150 Flow of Production Work in process. SOLUTION EXHIBIT 18-24 Weighted-Average Method of Process Costing with Spoilage. 285 100% Work in process. 100%.blogspot. and to units in ending work in process using the weighted-average method. conversion costs. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: Normal spoilage* 315 100%. Abnormal spoilage = Total spoilage Normal spoilage = 600 315 = 285 units. Degree of completion of normal spoilage in this department: direct materials. spoilage = 600 + 2.com 18-24 (25 min. 2. to abnormal spoilage. Panel A. 1. calculates the equivalent units of work done to date for each cost category in September 2008.100 = 315 units. conversion costs. 100%. 100%.100 2. Solution Exhibit 18-24. Panel B. †Total 18- . 40%.100 315 315 285 285 450 180 3. Chipcity. 450 40% Accounted for Work done to date 2.880 285 450 3.) Weighted-average method.100 – 450 = 600 units. September 2008.To download more slides.550 – 2.150 2. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Physical Units 600 2. 315 100% Abnormal spoilage† 285 100%. com SOLUTION EXHIBIT 18-24 PANEL B: Steps 3.To download more slides.400 $245. and 5— Summarize Total Costs to Account For.476) + (2.700 $663.000 3.071 (450# $210.blogspot.3125) (B) Abnormal spoilage (285 units) 84.150 $210. ending (450 units) 110.100#$210.476 $245.700 $663.3125 Assignment of costs Good units completed and transferred out (2. Compute Cost per Equivalent Unit.000 567.300 230.3125) Normal spoilage (315 units) 93.700 (Step 3) Work in process. 4. solutions and test bank. 18- . to Spoiled Units.329 (285# $210.400 $908.3125) (A) Total cost of good units completed and transferred out 714.700 # Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A.156 (2. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit (Step 5) Direct Materials $ 96.700 2. ebook. and to Units in Ending Work in Process Total Production Costs $111.000 $245. and Assign Total Costs to Units Completed.3125) (A)+(B)+(C) Total costs accounted for $908.476) + (285# $85.100 units) Costs before adding normal spoilage $621.000 $663.300 (C) Work-in-process. visit http://downloadslide.880 $85.173 (315# $210.000 Conversion Costs $ 15.100#$85.300 797.476) + (315# $85.476) + (180# $85. 450 40% 3. conversion costs. 100%. 100%. 315 100% † 285 Abnormal spoilage 285 285 285 100%. ebook. and assigns total costs to units completed and transferred out (including normal spoilage). 285 100% ‡ 450 Work in process. 1.com 18-25 (25 min.) FIFO method.blogspot. conversion costs. Chipcity. summarizes the total Chip Department costs for September 2008. 600 (100% 30%) # 1. visit http://downloadslide. beginning (given) 600 Started during current period (given) 2. Solution Exhibit 18-25. Solution Exhibit 18-25. 100%.100 18- . September 2008. 40%.100 = 315 units. 100%.150 Accounted for 2. #2.550 2.500 100% 315 Normal spoilage* 315 315 315 100%. *Normal spoilage is 15% of good units transferred out: 15% 2. 2.700 Work done in current period only ||Degree of completion in this department: direct materials.500 Started and completed 1. physical units completed and transferred out minus 600 physical units completed and transferred out from beginning work in process inventory. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 2) (Step 1) Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process.500 100%. and to units in ending work in process under the FIFO method. 100%. conversion costs. Degree of completion of abnormal spoilage in this department: direct materials. calculates the equivalent units of work done in the current period for each cost category in September 2008.150 Good units completed and transferred out during current period: From beginning work in process|| 600 0 420 600 (100% 100%). calculates the costs per equivalent unit for each cost category. Panel A.500 1. conversion costs. 100%. ending 450 180 450 100%. 30%. spoilage.To download more slides.500 1. SOLUTION EXHIBIT 18-25 First-in. ‡Degree of completion in this department: direct materials.550 To account for 3. 1. solutions and test bank. Degree of completion of normal spoilage in this department: direct materials. †Abnormal spoilage = Actual spoilage Normal spoilage = 600 315 = 285 units. Panel B. to abnormal spoilage. First-out (FIFO) Method of Process Costing with Spoilage. 419 $908.500 units) Normal spoilage (315 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (285 units) (C) Work in process.529 96.000 Conversion Costs $ 15. and Assign Total Costs to Units Completed.353) + (315§ $85.333) 705.840 $96.000 $663.com SOLUTION EXHIBIT 18-25 PANEL B: Steps 3.333) $663.590 87. visit http://downloadslide.333) (315§ $222.000 567.000 2.blogspot.333 (Step 5) Assignment of costs: Good units completed and transferred out (2.353 $230.691 115. beginning (600 units) Costs added to beg.300 35. ending (450 units) (A)+(B)+(C) Total costs accounted for §Equivalent $111.921 (1.500§ $222.100 units) Work in process. Compute Cost per Equivalent Unit.333) (450§ $222.353) + (285§ $85.000 + $245.300 230.To download more slides.353) + (420§ $85.550 $222.140 461.700 (Step 3) Work in process.353)+(1.700 $567.700 $ 85.333) 147.000 + $15. and to Units in Ending Work in Process Total Production Costs $111.500§$85.400 2.353) + (180§ $85. to Spoiled Units.700 units of direct materials and conversion costs calculated in Step 2 in Panel A. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (1.700 (285§ $222.300 (0§ $222. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs added in current period Divided by equivalent units of work done in current period Cost per equivalent unit Direct Materials $ 96. ebook.400 $245.400 $908. 18- .300 797. 4 and 5— Summarize Total Costs to Account For. solutions and test bank. Compute Cost per Equivalent Unit.500§ $200) + (1. SOLUTION EXHIBIT 18-26 Standard Costing Method of Process Costing with Spoilage.500 86.500 units) Normal spoilage (315 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (285 units) (C) Work in process. (This computation is the same for FIFO and standard-costing. The conversion cost per equivalent unit of beginning work in process and of work done in September 2008 is the standard cost of $75 given in the problem. The direct materials cost per equivalent unit of beginning work in process and of work done in September 2008 is the standard cost of $200 given in the problem. visit http://downloadslide. and to units in ending work in process using the standard costing method.700 units). beginning has 600 equivalent units (600 physical units 100%) of direct materials and 180 equivalent units (600 physical units 30%) of conversion costs. Panel A.500 Direct Materials (600 $200) (2. §Equivalent units of direct materials and conversion costs calculated in Step 2 in Solution Exhibit 18-25. 18- .550 $200) $630.000 $ Conversion Costs (180 $75) (2. shows the computation of the equivalent units of work done in September 2008 for direct materials (2. ending (450 units) (A)+(B)+(C) Total costs accounted for *Work 275 $133.375 103.000 + (285§ $75) (180§ $75) $216.) Standard-costing method.000 (Step 4) Standard costs per equivalent unit (given) $ (Step 5) Assignment of costs at standard costs: Good units completed and transferred out (2. Steps 3.000 $ 200 (600 $200) (0§ $200) + + 75 (180 $75) (420§ $75) 165. beginning* Costs added in current period at standard prices Costs to account for Total Production Costs $133.500 31. and to Units in Ending Work in Process (Step 3) Work in process.To download more slides.625 664. 4. beginning (600 units)* Costs added to beg. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (1. Panel A.500§ $75) (315§ $200) + (315§ $75) (285§ $200) + (450§ $200) + $630. solutions and test bank. to Spoiled Units. and 5—Summarize Total Costs to Account For. September 2008. 1.100 units) Work in process.000 in process. to abnormal spoilage.500 712.000 (1.) 2.000 412. Chipcity. Solution Exhibit 18-25.500 $846. Solution Exhibit 18-26 summarizes the total costs to account for. and assigns these costs to units completed (including normal spoilage).550 units) and conversion costs (2.com 18-26 (30 min.125 78.blogspot. ebook.500 $846. and Assign Total Costs to Units Completed. spoilage.700 $75) $216. 200 The unit cost of a good case is $15. Work-in-Process Control Materials Control. Cash Loss from Abnormal Spoilage Work-in-Process Control Loss = ($6. These costs are.blogspot.600 The unit cost of a good case now becomes $14. Wages Payable Control.000 200 1. normal spoilage is due to the production process. Cash 400 Work-in-Process Control 400 The cost of the remaining good cases = [($6. ebook.500) – $400] = $14. These costs are. not the particular attributes of this specific job. 3. Manufacturing Overhead Allocated The unit cost of a good case = $6.com 18-27 (20–30 min.3478 b. therefore. 2. not the particular attributes of this specific job. 18- . The cost of these cases is unaffected by the loss from abnormal spoilage. therefore. normal rework is due to the production process.200 The unit cost of a good case remains at $6.To download more slides. a. Cash Manufacturing Department Overhead Control Work-in-Process Control 400 800 1.300 = $6.00 2. 1.00 200) – $200 = $1. In 2b however.200 Remaining cases cost = $6. 200 200 The unit costs in 3a and 3b are different because in 3a the normal rework cost is charged as a cost of the job which has exacting job specifications. c.500 = $6.08 b. In 3b however. charged as part of manufacturing overhead and the manufacturing overhead cost of $1 per case already includes a provision for normal spoilage.00 per case c. The unit costs in 2a and 2b are different because in 2a the normal spoilage cost is charged as a cost of the job which has exacting job specifications.200 2.00 2. visit http://downloadslide. solutions and test bank. Manufacturing Overhead Allocated 200 200 The cost of the good cases = [($6.00 per case.00. Manufacturing Department Overhead Control Materials Control.500) + $200] = $15.600 2. charged as part of manufacturing overhead and the manufacturing overhead cost of $1 per case already includes a provision for this normal rework.) Spoilage and job costing. Wages Payable Control.000 1. a. ordering costs for the replacement tumbler units. the labor and other conversion costs spent on substituting the new tumbler units. The $44 tumbler units from the first supplier were eventually never used in any washing machine. 18- . c. and d. 2. the costs of any extra negotiations to obtain the replacement tumbler units. any higher price the existing supplier may have charged to do a rush order for the replacement tumbler units. The total costs of rework due to the defective tumbler units include the following: a.blogspot.com 18-28 (15 min. solutions and test bank. b. visit http://downloadslide.) Reworked units. The two alternative approaches to account for the materials costs of reworked units are: a. and that supplier is now bankrupt. This approach would highlight to White Goods the costs of the supplier problem.To download more slides. 1. To charge the costs of rework to the current period as a separate expense item as abnormal rework. The $50 tumbler cost is the cost of the actual tumblers included in the washing machines. 3. The units have now been disposed of at zero disposal value. To charge the costs of the rework to manufacturing overhead as normal rework. costs of rework. b. ebook. visit http://downloadslide. Journal entry to record scrap generated by a specific job and accounted for at the time scrap is sold is: Cash or Accounts Receivable Work-in-Process Control To recognize asset from sale of scrap.000 Manufacturing Department Overhead Control 4.000 Materials Control 4. 4. Journal entry to record scrap common to various jobs at the time scrap is returned to storeroom: Materials Control 4.000 4. job costing. When the scrap is reused as direct material on a subsequent job. Scrap common to various jobs and accounted for at the time of its sale can be accounted for in two ways: a. 490 490 2.000 3.000 4.000 b.To download more slides. Explanations of journal entries are provided here but are not required.) Scrap. solutions and test bank. ebook. the journal entry is: Work-in-Process Control 4. 4.000 To record value of scrap returned to storeroom. A memo posting is also made to the specific job record.000 To record reuse of scrap on a job. Regard scrap sales as offsets against manufacturing overhead (the method generally used when the dollar amount of scrap is material): Cash or Accounts Receivable Manufacturing Department Overhead Control To record cash raised from sale of scrap.com 18-29 (25 min. 1.blogspot. 18- . Regard scrap sales as a separate line item of revenues (the method generally used when the dollar amount of scrap is immaterial): Cash or Accounts Receivable Sale of Scrap To recognize revenue from sale of scrap. 000 25.500 – 18. spoilage.blogspot. 18- . beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: Normal spoilage* 1. and to units in ending work in process using the weighted-average method. 100%.000 100%.850 100%.000 Flow of Production Work in process. Cleaning Department of the Boston Company for May.500 units. ending‡ (given) 4.850 100% Abnormal spoilage† 650 100%.500 – 4.500 18.000 = 2. 650 100% Work in process.500 25.000 1.000 4. 100%.500 18.000 *Normal spoilage is 10% of good units transferred out: 10% 18. ‡Degree of completion in this department: direct materials.500 = 1.) Weighted-average method. to abnormal spoilage.500 1. and assigns total costs to units completed (including normal spoilage).850 1. solutions and test bank. Degree of completion of abnormal spoilage in this department: direct materials. Solution Exhibit 18-30 summarizes total costs to account for. conversion costs.500 – 1. 1. Abnormal spoilage = 2. 100%.850 = 650 units.000 25% Accounted for Work done to date (Step 2) Equivalent Units Direct Conversion Materials Costs 18.000 25. Degree of completion of normal spoilage in this department: direct materials. †Total spoilage = 2. calculates the equivalent units of work done to date for each cost category. ebook. visit http://downloadslide. 100%.850 1.500 + 22. 4. conversion costs.000 22.500 22.com 18-30 (30 min.850 units.850 650 650 650 4. conversion costs. 100%. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Physical Units 2. SOLUTION EXHIBIT 18-30 Weighted-Average Method of Process Costing with Spoilage. 25%.To download more slides. To download more slides. 18- (650# $1) (1. Compute Cost per Equivalent Unit.000 (A)+(B)+(C) Total costs accounted for $47.000 .000 20.000# $1) $22.000 #Equivalent (18.500# $1) (1.000 + units of direct materials and conversion costs calculated in Step 2 in Panel A above.000# $1) + $25.000 $ $22.500 22. solutions and test bank.700 (B) Abnormal spoilage (650 units) 1. ebook.500 $47.000 22. 4.000 Normal spoilage (1. and to Units in Ending Work in Process Total Production Costs $ 4.850# $1) (650# $1) + (4.000 units) 5.500 42. to Spoiled Units. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit Direct Materials $ 2.000 Conversion Costs $ 2.000 $25.500 $25.000 25.700 (A) Total costs of good units completed and transferred out 40. and 5— Summarize Total Costs to Account For.com SOLUTION EXHIBIT 18-30 PANEL B: Steps 3.500# $1) + (18.850 units) 3.000 $22. ending (4.850# $1) + (1.000 (Step 3) Work in process.blogspot. and Assign Total Costs to Units Completed. visit http://downloadslide.500 units) Costs before adding normal spoilage $37.300 (C) Work in process.000 $ 1 1 (Step 5) Assignment of costs Good units completed and transferred out (18. 500 18- .500 (100% 100%). #18. physical units completed and transferred out minus 2. 100%. Degree of completion of abnormal spoilage in this department: direct materials. †Total spoilage = 2.000 _____ 25. 100%.000 100%.500 – 4. 2.500 22. conversion costs.000 = 2. and assigns total costs to units completed and transferred out (including normal spoilage).500 1. Cleaning Department of the Boston Company for May.000# 1. conversion costs.blogspot.) FIFO method.To download more slides.000 (Step 2) Equivalent Units Direct Conversion Materials Costs 2.500 (100% 80%) Started and completed 16.850 = 650 units. 16.com 18-31 (25 min. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: From beginning work in process|| 2.850 units. ending‡ 4.500 = 1. conversion costs.000 100% Normal spoilage* 1. Degree of completion of normal spoilage in this department: direct materials. solutions and test bank. calculates the equivalent units of work done in the current period for direct materials and conversion costs. 1.000 25% Accounted for Work done in current period only || Degree (Step 1) Physical Units 2.000 _____ 22.000 of completion in this department: direct materials.500 – 1.850 650 650 4. 25%. *Normal spoilage is 10% of good units transferred out: 10% 18.500 25. ‡Degree of completion in this department: direct materials.000 _____ 20.000 16. 100%. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units Flow of Production Work in process.500 physical units completed and transferred out from beginning work-in-process inventory. First-out (FIFO) Method of Process Costing with Spoilage. For the Cleaning Department. and to units in ending work in process under the FIFO method. conversion costs.500 units Abnormal spoilage = 2.000 1. SOLUTION EXHIBIT 18-31 First-in.850% 100% Abnormal spoilage† 650 100%. visit http://downloadslide.500 + 22. 650 100% Work in process. 80%. 4. spoilage. 100%.500 0 500 16. Solution Exhibit 18-31 summarizes the total costs for May.850 650 4.000 16.500 – 18. to abnormal spoilage. ebook.000 100%.850 1. 100%.850 100%. 100%. and 5— Summarize Total Costs to Account For.000 $ 1 (Step 5) Assignment of costs: Good units completed and transferred out (18.500 $47.300 5. to Spoiled Units. 4.000§ $1) (1. 18- $2.000 .000 (Step 3) Work in process.500 22.500 $ 2.500 (0§ $1) + $2.000 units of direct materials and conversion costs calculated in Step 2 in Panel A. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (16.000 20.To download more slides.500 units) Work in process.850§ $1) + (1. and to Units in Ending Work in Process Total Production Direct Costs Materials $ 4.500 units) Costs added to beg.000 20. and Assign Total Costs to Units Completed. beginning (2.000 3.000 $20.000§ $1) + (16.000 $47.com SOLUTION EXHIBIT 18-31 PANEL B: Steps 3.500 500 5.850 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (650 units) (C) Work in process. solutions and test bank. ending (4.blogspot.000§ $1) $25. ebook.850§ $1) (650§ $1) + (650§ $1) (4.000 $22.000 32.000 + (500§ $1) (16.000 units) (A)+(B)+(C) Total costs accounted for §Equivalent $ 4.000 + $22.000 $25.700 40.500 $ 1 Conversion Costs $ 2.000§ $1) + (1. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs added in current period Divided by equivalent units of work done in current period Cost per equivalent unit $22. visit http://downloadslide.500 22.500 42.700 1.000 units) Normal spoilage (1. Compute Cost per Equivalent Unit. 100%. Abnormal spoilage = 1. 250 100%. 100%.000 *Normal spoilage is 5% of good units transferred out: 5% 15. ‡Degree of completion in this department: transferred-in costs. 0%.000 ______ 16. direct materials.500 250 10. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Flow of Production Work in process. 250 100% Work in process.blogspot.500 + 18. ending‡ (given) 10. 100%. 100%. direct materials. and to units in ending work in process using the weighted-average method. 10. Degree of completion of normal spoilage in this department: transferred-in costs.To download more slides. visit http://downloadslide. ebook. Packaging Department (continuation of 18- For the Packaging Department.000 – 750 = 250 units.500 – 15. †Total spoilage =7.000 = 750 units.000 15. calculates the equivalent units of work done to date for each cost category. 100%.500 _____ 18. 18- .000 26. Solution Exhibit 18-32 summarizes total costs to account for. 100%. solutions and test bank. (35 min. Degree of completion of abnormal spoilage in this department: transferred-in costs. 750 100% Abnormal spoilage† 250 100%.000 750 750 750 250 250 250 0 2.00025% Accounted for Work done to date Physical Units 7.000 – 10.000 10.500 18.000 15.000 100%.com 18-32 30). direct materials.500 26. conversion costs. conversion costs. Packaging Department of the Boston Company for May. and assigns costs to units completed (including normal spoilage).000 = 1.0000%. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: Normal spoilage* 750 100%.) Weighted-average method. SOLUTION EXHIBIT 18-32 Weighted-Average Method of Process Costing with Spoilage.000 15. 750 100%.000 750 (Step 2) Equivalent Units TransferredDirect Conversion in Costs Materials Costs 15. 100%. conversion costs.000 units. to abnormal spoilage. 10.000 26. 25%. 700* $56.500 56.000 units) (A)+(B)+(C)Total costs accounted for $49.464 15.000# ($2. 18- .600 16.000# $2.500 *Total costs of good units completed and transferred out in Panel B (Step 5) of Solution Exhibit 18-30.1856 1. ebook. solutions and test bank.600 + $18.284 2.825 26. and Assign Total Costs to Units Completed.1856 + $0.250 54. #Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A above.blogspot.000 $2. and to Units in Ending Work in Process Total Production Transferred-in Costs costs (Step 3) Work in process.500# $1) $56.600 Conversion Costs $ 6.1856 + $0.375 $18.1856 + $0.10)+(2. Compute Cost per Equivalent Unit.10 18.500 $ 1 (Step 5) Assignment of costs Good units completed and transferred out (15.600 $1. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit $22. to Spoiled Units.925 $16.To download more slides. visit http://downloadslide.825 + $1.125 12.1856)+(0# $0.10 + $1) (10.825 Direct Materials $ 0 1.125 40.000 $ 0.000 units) Costs before adding normal spoilage Normal spoilage (750 units) (A) Total cost of good units completed and transferred out (B) Abnormal spoilage (250 units) (C) Work in process. ending (10.925 250# ($2.748 821 24.356 $76. 4.com SOLUTION EXHIBIT 18-32 PANEL B: Steps 3. and 5— Summarize Total Costs to Account For.10 + $1) 750# ($2.675 $76.10 + $1) 51.500 18. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units Flow of Production Work in process. First-out (FIFO) Method of Process Costing with Spoilage.500 – 15.500 (100% 80%) Started and completed 7. Solution Exhibit 18-33 summarizes the total Packaging Department costs for May. 80%.000 = 750 units. 7. 7. shows the equivalent units of work done in the Packaging Department in the current period for transferredin costs. 7.000 12.500 100%. conversion costs. direct materials. solutions and test bank. Packaging Department of the Boston Company for May. 100%. 100%.500 750 750 750 250 250 250 10. Abnormal spoilage = 1. and conversion costs.500 1.000 0 2.500 (100% 100%).000 25% Accounted for Work done in current period only ||Degree (Step 1) Physical Units 7. #15. conversion costs. 100%. 7.000 – 10.000 100%.500 + 18. Degree of completion of abnormal spoilage in this department: transferred-in costs. 750 100% Abnormal spoilage† 250 100%. direct materials. 25%. †Total spoilage = 7.000 18. 0%. 750% 100%.500 18. to abnormal spoilage.000 26.500 physical units completed and transferred out from beginning work-in-process inventory. physical units completed and transferred out minus 7.000 18- .500 26. 0%.blogspot. ending ‡ 10.com 18-33 (25 min. conversion costs.000 = 1. 250 100%. conversion costs.500 7. 100%.500 of completion in this department: transferred-in costs. visit http://downloadslide.500 7.500 0 7. 100%. 100%. 100%.500 7.500 16.000 units. 100%.500# 750 250 10.500 7. 250 100% Work in process. 10. Degree of completion of normal spoilage in this department: transferred-in costs.) FIFO method. direct materials.000 – 750 = 250 units. direct materials. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: From beginning work in process|| 7. *Normal spoilage is 5% of good units transferred out: 5% 15. ‡Degree of completion in this department: transferred-in costs. direct materials.To download more slides.500 100% Normal spoilage* 750 100%. and to units in ending workin-process under the FIFO method. SOLUTION EXHIBIT 18-33 First-in. Packaging Department (continuation of 18-31).500 (100% 0%).500 100%.000 0%. 10. and assigns total costs to units completed and transferred out (including normal spoilage). ebook.000 (Step 2) Equivalent Units TransferredDirect Conversion in Costs Materials Costs 7. Compute Cost per Equivalent Unit.500§ ($2.000§$2.250 54.10 $12.375 12.125 (0 $2.10)+(1.000 units) (A)+(B)+(C) Total costs accounted for $22.20 + $0. §Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A.20) + (7.20)+(0§$0.125 40.925 7.99 (Step 5) Assignment of costs: Good units completed and transferred out (15. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (7.000 units) Work in process.99) (10. 18- + .500 units) Normal spoilage (750 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (250 units) (C) Work in process.500§$0. and 5— Summarize Total Costs to Account For.467 51.99) 750§ ($2. solutions and test bank.600 + $18.99) $56.10 + $0.500§ 0.600 $56.000 $ 0.10 + $0.10)+(2. beginning (given) Costs added in current period (given) Total costs to account for $22.600 $ 6.500 $ 2.475 $76. 4.600 ÷16. ebook. and to Units in Ending Work in Process Total Production Costs (Step 3) (Step 4) Work in process.125 12.125 + $0 $6.500 $ 0.675 2.20 + $0.20 + $0. beginning (7.925 Costs added in current period Divided by equivalent units of work done in current period Cost per equivalent unit Transferredin Costs Direct Materials Conversion Costs $16.99) 250§ ($2.627 823 24.700 18.500 *Total costs of good units completed and transferred out in Step 5 Panel B of Solution Exhibit 18-31.485 24.com SOLUTION EXHIBIT 18-33 PANEL B: Steps 3.250 2. to Spoiled Units.700* $ 0 1.10 + $0.500§$0. visit http://downloadslide.675 $76.235 $16.825 $1.375 $18.blogspot.20 $1.500 units) Costs added to beg. ending (10.500 $40.99) 24.To download more slides. and Assign Total Costs to Units Completed.825 + $1. 300 $72. $72. Then.To download more slides. $800 salvage value plus $332 = $1. If the inputs are used to determine the 1%: $40. a.875 minus $743 = $1.425 Then.075 spoilage minus $743 = $332 spoilage cost that is taken out of the job.com 18-34 (2025 min.300 1% of $74.995 2.blogspot.000 $74.875 1.300 = $743. a.875) 800 1.400 + $22.425 22.600 + $11.000 11. The journal entry would be: Materials Control Manufacturing Overhead Control Work-in-Process Control 800 351 1.151 18- .132 If the outputs are used to determine the 1%: $40. and charge manufacturing overhead would be: Materials Control Manufacturing Overhead Control Work-in-Process Control ($1.132) 800 332 1.300 – 300 = 11.300 = $74.300) or the cost of the good output before the "1% normal spoilage" is added.600 + $11. remove the salvageable material.132. Materials Control Manufacturing Overhead Control Work-in-Process Control (975 + 600 + 300 = 1. or $1. rounded.995 1. the entry to leave the $743 "normal spoilage" cost on the job.400 – $975 = $39. The clause does not specify whether the 1% calculation is to be based on the input cost ($40.075 b.400 + $22.425 1% = $724.25 or $724. visit http://downloadslide.) Job-costing spoilage and scrap. ebook.600 – 600 = 22. b. solutions and test bank. 1. Accounts Receivable or Cash Work-in-Process Control 1. ) Spoilage in job costing 1.000 4.800 b) Journal entry for rework common to all jobs: Manufacturing Overhead Control (rework costs) Various Accounts 1.000 4.000 1.000 5. visit http://downloadslide.800 c) Journal entry for abnormal rework: Loss from Abnormal Rework Various Accounts 1.) Rework in job costing. ebook.000 b) Journal entry for spoilage common to all jobs: Materials Control (spoiled goods at current disposal value) 5 × $200 Manufacturing Overhead Control (normal spoilage) Work-in-Process Control (Job #10) 1. the budgeted manufacturing overhead would include expected normal spoilage costs. the net loss is highlighted and always charged to an abnormal loss account. solutions and test bank. a) Journal entry for spoilage related to a specific job: Materials Control (spoiled goods at current disposal value) 5 × $200 Work-in-Process Control (Job #10) 1.000) + (5 × $800) = $39. 2.800 1. c) Journal entry for abnormal spoilage: Materials Control (spoiled goods at current disposal value) 5 × $200 Loss from Abnormal Spoilage 5 × $800 Work-in-Process Control (job #10) 1.To download more slides. Normal spoilage rate= Units of normal spoilage ÷ Total good units completed = 5 ÷ 35 = 14.3%.com 18-35 (15 min.blogspot.800 1.000 Note: In developing the predetermined O/H rate. The cost of the 35 good units is (35 × 1. journal entry (continuation of 18-35) a) Journal entry for rework related to a specific job: Work-in-Process Control (Job #10) Various Accounts (To charge rework costs to the job) 1.800 1.000 5.000 Note: The costs incurred on the bad units (5 × $1.800 18- .000 Note: If the spoilage is abnormal.000) are already part of the balance in WIP. 18-36 (10 min. 000 units spoiled) = 6% 110.000 134. solutions and test bank.com 18-37 (10 min. c6% (134.000a 7.220 11.000 ending inventory = 113.000 ) = 6% 124.000 = 7.000 spoiled – 11.000 134.000 units started – 10.000a 6.000 units are fully completed and inspected during March.600. because 113.440c 2.000 = 6.000 134.000 120.000 = 6.000 134. Work in process.780d 3.000 Inspection at 40% 14. visit http://downloadslide.000 –10. because all units passed the 40% completion inspection point in March.780.) Physical units. 18- .000 Inspection at 100% 14.To download more slides.000 113.000.) Scrap at time of sale or at time of production.000 – normal spoilage) Work in process.000 113.000 134.560 11. b6% (120.400 11.000 *Degree of completion for conversion costs of the forging process at the dates of the work-in-process inventories a14.000 113.000 beginning inventory +120. ending (70%)* Accounted for Inspection at 15% 14. journal entries (continuation of 18-35) a) Journal entry for recognizing immaterial scrap at time of sale: Cash or Accounts Receivable 300 Scrap Revenues 300 (To record other revenue sale of scrap) b) Journal entry for recognizing material scrap related to a specific job at time of sale: Cash or Accounts Receivable 300 Work-in-Process Control (Job #10) 300 c) Journal entry for recognizing material scrap common to all jobs at time of sale: Cash or Accounts Receivable 300 Manufacturing Overhead Control 300 d) Journal entry for recognizing material scrap as inventory at time of production and recording at net realizable value: Materials Control 300 Work-in-Process Control (Job #10) 300 Cash or Accounts Receivable Materials Control (When later sold) 300 300 18-38 (2025 min.blogspot.000 units – 10. beginning work-in-process inventory is excluded because it was already 20% complete at March 1 and past the inspection point. beginning (20%)* Started during March To account for Good units completed and transferred out Normal spoilage Abnormal spoilage (10.000 134.000a 6. inspection at various stages of completion (chapter appendix). ebook.600b 3.440.000 120.000 120. d6% 113. The cost of ending work in process includes the assignment of normal spoilage costs since these units have passed the point of inspection. contains direct materials units. We comment on several points in this calculation: Ending work in process includes an element of normal spoilage since all the ending WIP have passed the point of inspection––inspection occurs when production is 80% complete. Direct materials are added only later when production is 90% complete.com 18-39 (2535 min.000 – (62. The units in the ending inventory have passed inspection. but not for beginning work in process.blogspot. The ending work in process. The costs assigned to each cost category are as follows: Cost of good units completed and transferred out (including normal spoilage costs on good units) Abnormal spoilage Cost of ending work in process (including normal spoilage costs on ending work in process) Total costs assigned and accounted for 18- $2. Solution Exhibit 18-39. The reason is that direct materials are added when production is 90% complete. while the units in ending WIP are 95% complete. solutions and test bank.500 must have been spoiled in May [100.000)]. therefore. which is 95% complete. Therefore.500 – 8.000 ending inventory)].750 [0. which is 25% complete.500 started).000 .346. Normal spoilage is 8. to abnormal spoilage.000 units to account for (12.To download more slides. inspection at 80% completion (chapter 18-39 appendix). of the 100. and assigns costs to units completed (including normal spoilage).675 $3.750). calculates the equivalent units of work done for each cost category. Spoilage includes no direct materials units because spoiled units are detected and removed from the finishing activity when inspection occurs at the time production is 80% complete. computes the costs per equivalent unit for each cost category. Panel B. Panel A.10 (62.500 beginning + 87.750 remainder is abnormal spoilage (12. Direct materials units are included for ending work in process. The 3.687 84. and to units in ending work in process using the weighted-average method.) Weighted-average method. summarizes total costs to account for. Solution Exhibit 18-39.638 917.500 completed + 25.500 + 25.349. The computation and allocation of spoilage is the most difficult part of this problem. 12. the beginning work in process does not. visit http://downloadslide. ebook. 2.750 100%. 18- . 25.250 100%.750 = 3. 0%. 100%. 2. 100%.750 80% Accounted for Work done to date Physical Units 12. 100%. 10% 25.250 80% Work in process. 95%.500 80% Abnormal spoilage† 3. conversion costs.500 3.500 96.000 = 2.000 62. 80%. Degree of completion of normal spoilage in this department: transferred-in costs.750 0 3.500 0 2. **Normal spoilage is 10% of the good units in ending WIP that have passed the inspection point.250 0 5. direct materials.250 25. ending ‡ (given) 25.500 8. 6.000 25.750 units. 100%. Degree of completion of abnormal spoilage in this department: transferred-in costs.750 100. direct materials. Degree of completion of normal spoilage in this department: transferred-in costs. direct materials.To download more slides.000 95% Normal spoilage on ending WIP** 2.500 100. 80%. solutions and test bank.500 = 6. conversion costs.000 25.blogspot.750 0%. 25. 6.500 62. direct materials.000 *Normal spoilage is 10% of good units that pass inspection: 10% 62. 0%.500 62. 80%. Finishing Department of the Kim Company for August.000 23.000 87.500 100%. conversion costs. †Abnormal spoilage = Actual spoilage Normal spoilage = 12.000 100%.500 0%. ebook. visit http://downloadslide.com SOLUTION EXHIBIT 18-3 18-399 Weighted-Average Method of Process Costing with Spoilage.000 3.750 2. 3. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Flow of Production Work in process.250 (Step 2) Equivalent Units TransferredDirect Conversion in Costs Materials Costs 62.500 units.000 2. conversion costs.500 87. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: Normal spoilage on good units* 6. 100%. 3.250 0%.000 100. 0%.250 units.500 6.000 100%.500 6. ‡Degree of completion in this department: transferred-in costs. ebook.000 $819.675 $913.000 + $819.638 62.688 84.13) + (25.13 + $9.000 96.500# $9. solutions and test bank.500 1.500 units) Costs before adding normal spoilage Normal spoilage (6.36) + (23. and conversion costs calculated in Step 2 in Panel A. beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit $ 156.000# $16.346.000 $913. Compute Cost per Equivalent Unit.80) 861.000 $3.250 $ $ 9. and Assign Total Costs to Units Completed.063 2.blogspot.250# $9.000 $ 9.875 809.13) + (0# $9.36) + (2.000 units) WIP ending.36 52.000 16.250 (25. 18- .250 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (3.13) + 917.617.500# ($9.36) + (5. and to Units in Ending Work in Process Total Production TransferredCosts in Costs (Step 3) Work in process.625 141.000 $ $819.750 units) Work in process.564.349.000 Equivalent units of transferred-in costs.80) (3.000# $16.500 $1. ending (25.205. before normal spoilage Normal spoilage on ending WIP (C) Total costs of ending WIP (A)+(B)+(C) Total costs accounted for # $2.80) (0# $9.000 + $1.425 (2.000 $913.750# $16.36) + (3.80) 56. visit http://downloadslide.To download more slides.000# $9.com SOLUTION EXHIBIT 18-3 18-399 PANEL B: Steps 3. direct materials.000 87.625 3.617.13) + (0# $9.617.13 Direct Materials Conversion Costs $ 819.500 $1.375 $3.80 (Step 5) Assignment of costs Good units completed and transferred out (62.000 100. to Spoiled Units.125 $103.349. and 5— Summarize Total Costs to Account For.750# $9.80) (6. 4.36 + $16.192.000# $16.000# $9. Work-in-Process Control (CS1 chips) ($110 80) Materials Control ($60 80) Wages Payable ($12 80) Manufacturing Overhead Allocated ($38 80) Total costs assigned to 80 spoiled units of CS1 chips before considering rework costs. 8.) Job costing. rework.800 Loss from Abnormal Rework ($36 30) Materials Control ($12 30) Wages Payable ($9 30) Manufacturing Overhead Allocated ($15 30) Total costs of abnormal rework on 30 units (Abnormal rework = Actual rework – Normal rework = 80 – 50 = 30 units) of CS1 chips. but not attributable specifically to the CS1 chip batches or jobs. ebook.200 1. 18- .800 would be charged to CS1.800 Total rework costs for CS1 chips in August 2008 are as follows: Normal rework costs allocated to CS1 Abnormal rework costs for CS1 Total rework costs $1.040 600 450 750 360 270 450 1.080 are linked to CS1 in the management control system even though for financial reporting purposes the abnormal rework costs are written off to the income statement. but the rework was not caused by the specific requirements of CS1.blogspot.800 960 3. 1. the machines happened to malfunction when CS1 was being made.800 Manufacturing Department Overhead Control (rework) Materials Control ($12 50) Wages Payable ($9 50) Manufacturing Overhead Allocated ($15 50) Normal rework on 50 units. b. 2. For example. then all $1.To download more slides. 1.000:500 since each calculator requires the same number of machine-hours.com 18-40 (30 min. solutions and test bank.200 600 4. If it were.080 $2.200 of the normal rework costs are allocated to CS1 even though the normal rework costs of the 50 CS1 calculators reworked equal $1.) 1. Only $1.080 Work-in-Process Control (CS1 chips) Work-in-Process Control (CS2 chips) Manufacturing Department Overhead Allocated (rework) (Allocating manufacturing department rework costs to CS1 and CS2 in the proportion 1.280 We emphasize two points: a. Abnormal rework costs of $1. visit http://downloadslide. 1. The reason is that the normal rework costs are not specifically attributable to CS1.800.
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