Cost Accounting Chapter 18
Rework refers to ________. A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units B) products of a joint production process that have low total sales values relative to the total sales value of the main product C) units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices D) residual material that results from manufacturing a product
A
What costs would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing? A) $21,060; $37,440 B) $12,960; $37,440 C) $14,400; $12,960 D) $16,000; $8,000
A
) If scrap is reused as direct material rather than sold as scrap ________. A) Accounts Receivable is debited at its estimated net realizable value and then credited when the scrap is reused B) Materials Control is debited at its estimated net realizable value and then credited when the scrap is reused C) Manufacturing Overhead Control is debited at its estimated net realizable value and then credited when the scrap is reused D) Work-in-Process Control is debited at its estimated net realizable value and then credited when the scrap is reused
B
500 shirts are sold as seconds at $12 per shirt. Cost of spoiled shirts is $500,000. Cost of shirts at inspection point equals $9,500,000. Calculate the net cost of the spoilage. A) $9,494,000 B) $494,000 C) $506,000 D) $9,506,000
B
Costs of normal spoilage are usually accounted for as ________. A) a deduction from the cost of goods sold B) a component of the costs of good units manufactured C) a "loss from normal spoilage account" in income statement D) a liability on a balance sheet
B
Which of the following is true of unit costs of normal and abnormal spoilage when they are detected at the same inspection point? A) Unit cost of normal spoilage is more than unit cost of abnormal spoilage. B) Unit cost of normal spoilage is equal to unit cost of abnormal spoilage. C) Unit cost of abnormal spoilage is more than unit cost of normal spoilage. D) Addition of unit cost of normal spoilage and unit cost of abnormal spoilage is equal to unit cost of good units produced and transferred.
B
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) Finished Goods 10,560.28 Loss from Spoilage 10,560.28 B) Loss from Spoilage 2640.00 Finished Goods 2,640.00 C) Finished Goods 287,600.00 Work in Process 287,600.00 D) Finished Goods 110,000.00 Work in Process 110,000.00
C
Which of the following statement is true of costs of normal and abnormal spoilage? A) Costs of normal spoilage are shown as an asset in a balance sheet; however, abnormal spoilage costs are shown as liabilities in a balance sheet. B) Costs of abnormal spoilage are shown as an asset in a balance sheet; however, normal spoilage costs are shown as liabilities in a balance sheet. C) Costs of abnormal spoilage are separately accounted for as losses of the accounting period in which they are detected. D) Costs of normal spoilage are separately accounted for as losses of the accounting period in which they are detected.
C
Which of the following statements is true of an abnormal spoilage? A) It is a spoilage which is inherent in a particular production process. B) It arises even when the process is carried out in an efficient manner. C) It is usually regarded as avoidable and controllable. D) The costs of abnormal spoilage are typically included as a component of the costs of good units manufactured.
C
If scrap, common to all jobs, is returned to the storeroom and the time between the scrap being inventoried and its disposal is quite lengthy, the journal entry is ________. A) Accounts Receivable Materials Control B) Materials Control Work-in-Process Control C) Work-in-Process Control Materials Control D) Materials Control Manufacturing Overhead Control
D
In accounting for scrap, which of the following statements is true? A) Normal scrap is accounted for separately from abnormal scrap. B) In accounting for scrap, there is no distinction between the scrap attributable to a specific job and scrap common to all jobs. C) Initial entries to scrap accounting records are most often made in dollar terms. D) Scrap records not only help measure efficiency, but also help keep track of scrap, and so reduce the chances of theft.
D
Outose Concept manufactures small tables in its Processing Department. Direct materials are added at the initiation of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some units are spoiled due to nondetectible materials defects. Inspection occurs when units are 50% converted. Spoiled units generally constitute 4% of the good units. Data for December 2015 are as follows: WIP, beginning inventory 12/1/2015 22,000 units Direct materials (100% complete) Conversion costs (75% complete) Started during December 76,000 units Completed and transferred out 12/31/2015 72,000 units WIP, ending inventory 12/31/2015 18,000 units Direct materials (100% complete) Conversion costs (65% complete) Costs for December: WIP, beginning Inventory: Direct materials $ 150,000 Conversion costs 76,800 Direct materials added 222,400 Conversion costs added 290,000 4) What is the number of total spoiled units? A) 10,200 units B) 2,880 units C) 5,120 units D) 8,000 units
D
Which of the following entries reflects the original cost assignment to spoiled units before considering rework cost? A) Work-in-Process Control XXX Materials Control XXX Wages Payable Control XXX Manufacturing Overhead Allocated XXX B) Finished Goods Control XXX Work-in-Process Control XXX C) Manufacturing Overhead Allocated XXX Materials Control XXX Wages Payable Control XXX Work-in-Process Control XXX D) Materials Control XXX Wages Payable Control XXX Work-in-Process Control XXX Manufacturing Overhead Allocated XXX
A
Which of the following is an example of scrap? A) short lengths from woodworking operations B) defective units of laptops detected after the production process but reworked before the units are sold as good products to customers C) defective aluminum cans sold to aluminum manufacturers for remelting to produce other aluminum products D) defective shirts, jeans, shoes, and carpeting sold as seconds
A
Which of the following entries is correct when the costs of the rework is normal and common to all the jobs? A) Manufacturing Overhead Control XXX Materials Control XXX Wages Payable Control XXX Manufacturing Overhead Allocated XXX B) Work-in-Process Control XXX Materials Control XXX Wages Payable Control XXX Manufacturing Overhead Allocated XXX C) Wages Payable Control XXX Manufacturing Overhead Allocated XXX D) Wages Payable Control XXX Manufacturing Overhead Allocated XXX Manufacturing Overhead Control XXX Materials Control XXX
A
A production process which involves spoilage and rework occurs in ________. A) the manufacture of high precision machine tools B) the manufacture of semiconductor units C) the manufacture of clothing D) the mining industry
A
Abnormal spoilage totals ________. A) 5,800 units B) 0 units C) 7,200 units D) 13,000 units
A
If a company set a standard of zero rework ________. A) all rework is treated as abnormal and is written off as a cost of the current period B) all rework is treated as normal and is written off as a cost of the current period C) all rework is treated as abnormal and is shown as a liability of the current period D) all rework is treated as normal and is shown as a liability of the current period
A
Normal spoilage is computed on the basis of the number of ________. A) good units that pass inspection during the current period B) units that pass the inspection point during the current period C) units that are in ending work in process D) units that started during the particular period
A
Normal spoilage totals ________. A) 7,200 units B) 0 units C) 13,000 units D) 5,800 units
A
The cost per good unit in the weighted-average method is equal to the ________. A) total cost of direct materials and conversion costs per equivalent unit, plus a share of normal spoilage B) sum of the costs per equivalent unit of direct materials and conversion costs C) total costs divided by total equivalent units D) total costs transferred out divided by total abnormal spoilage
A
The inspection point is the ________. A) stage of the production cycle where products are checked to determine whether they are acceptable or unacceptable units B) point at which costs are allocated between normal and abnormal spoilage C) point at which the calculation of equivalent units is made D) stage of allocating total costs transferred out to good units completed and transferred
A
Verer Custom Carpentry manufactures chairs in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 4% of the good units. Data provided for March 20X5 are as follows: WIP, beginning inventory 3/1/20X5 32,000 units Direct materials (100% complete) Conversion costs (85% complete) Started during March 70,000 units Completed and transferred out 80,000 units WIP, ending inventory 3/31/20X5 18,000 units Direct materials (100% complete) Conversion costs (80% complete) Costs: WIP, beginning inventory: Direct materials $ 70,000 Conversion costs 40,000 Direct materials added 105,000 Conversion costs added 128,160 20) What are the normal and abnormal spoilage units, respectively, for March when using FIFO? A) 3,200 units; 800 units B) 1,950 units; 1,390 units C) 3,690 units; 1,850 units D) 1,420 units; 2,000 units
A
When spoiled goods have a disposal value, the net cost of the spoilage is computed by ________. A) deducting disposal value from the costs of the spoiled goods accumulated to the inspection point B) adding the costs to complete a saleable product to the costs accumulated to the inspection point C) deducting the costs to complete a saleable product from the costs accumulated to the inspection point D) adding disposal value to the costs of the good units transferred
A
What are the total costs of all the units that were started during February and subsequently shipped before the end of the period? A) $628,560 B) $503,100 C) $636,320 D) $398,250
B
What cost is allocated to abnormal spoilage using the weighted-average process-costing method? A) $ 0 B) $25,520 C) $11,600 D) $13,920
B
Which of the following sentences is true of normal spoilage and abnormal spoilage? A) Normal spoilage costs are inventoriable and are added to the cost of good units produced, while abnormal spoilage costs are deducted from the cost of good units produced. B) Abnormal spoilage costs are inventoriable and are deducted from the cost of good units produced, while normal spoilage costs are expensed in the accounting period in which they occur. C) Abnormal spoilage costs are inventoriable and are added to the cost of good units produced, while normal spoilage costs are expensed in the accounting period in which they occur. D) Normal spoilage costs are inventoriable and are deducted from the cost of good units produced, while abnormal spoilage costs are expensed in the accounting period in which they occur.
A
Which of the following statements is true of normal spoilage and abnormal spoilage? A) Normal spoilage is inherent in a particular production process, whereas abnormal spoilage is not inherent in a particular production process. B) Abnormal spoilage arises even when the process is carried out in an efficient manner, whereas normal spoilage does not arise when the process is carried out in an efficient manner. C) Normal spoilage is usually regarded as avoidable and controllable, whereas abnormal spoilage is unavoidable and uncontrollable. D) The costs of normal spoilage are recorded as a loss as a separate line item in an income statement, whereas costs of abnormal spoilage are included as a component of the costs of good units manufactured.
A
Colil Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $300,000 during the month. Work-in-process records revealed that 10,000 card units were started in January, 5,000 card units were complete, and 4,000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. What is the direct material cost per equivalent unit? A) $20.00 B) $30.00 C) $25.00 D) $35.00
B
Cost of spoiled units equals ________. A) all costs incurred in producing them up to the point of delivery B) all costs incurred in producing them up to the point of inspection C) all costs incurred in producing them up to the point of selling D) all costs incurred in producing them up to the point of packaging
B
Excluding spoiled units in the equivalent-unit calculation results in ________. A) lower cost per good unit. B) higher cost per good unit C) better management information D) higher cost for spoiled units
B
Normal spoilage rates are computed by ________. A) dividing the units of normal spoilage by total actual units started into production B) dividing the units of normal spoilage by total good units completed C) dividing total actual units started into production by the units of normal spoilage D) dividing total good units completed by the units of normal spoilage
B
Spoilage refers to ________. A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units B) units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices C) residual material that results from manufacturing a product D) products of a joint production process that have low total sales values relative to the total sales value of the main product
B
Spoilage that is an inherent result of the particular production process and arises even under efficient operating conditions is referred to as ________. A) incremental spoilage B) normal spoilage C) irregular spoilage D) direct spoilage
B
The Peric Manufacturing Shop produces motorcycle parts. Typically, 12 pieces out of a job lot of 1,000 parts are spoiled. Costs are assigned at the inspection point, $40.00 per unit. Spoiled pieces may be disposed at $8.00 per unit. The spoiled goods must be inventoried appropriately when the normal spoilage is detected. The current job requires the production of 3,000 good parts. Which of the following journal entries properly reflects the recording of spoiled goods? A) Materials Control 200 Manufacturing Overhead Control 1,000 Work-in-Process Control 1,200 B) Materials Control 288 Manufacturing Overhead Control 1,152 Work-in-Process Control 1,440 C) Work-in-Process Control 1,440 Materials Control 288 Manufacturing Overhead Control 1,152 D) Manufacturing Overhead Control 1,200 Materials Control 200 Work-in-Process Control 1,000
B
The costs of normal spoilage are allocated to the units in ending work-in-process inventory, in addition to completed units if the units ________. A) in ending inventory have not passed the inspection point B) in ending work-in-process inventory have passed the inspection point C) in ending work in process inventory are more than 25% complete D) in ending work-in-process inventory are less than 25% complete
B
The standard-costing method ________. A) adds a layer of complexity to the calculation of equivalent-unit costs in a process-costing environment B) makes calculating equivalent-unit costs unnecessary C) requires an analysis of the spoilage costs in beginning inventory D) requires an analysis of the spoilage costs in ending inventory
B
To recognize the disposal value of normal spoilage, ________. A) Manufacturing Overhead Control account is debited with spoiled goods at current net disposal value. B) Materials Control account is debited with spoiled goods at current net disposal value. C) Work-in-Process Control account is debited with spoiled goods at current net disposal value. D) Manufacturing Overhead Control account is credited with spoiled goods at current net disposal value.
B
Under the FIFO method, all spoilage costs are assumed to be related to the units ________. A) in beginning inventory, plus the units completed during the period B) completed during the period C) in ending inventory D) in both beginning and ending inventory plus the units completed during the period
B
What are the direct material and conversion costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped? Take into account the costs related to the completion of the conversion of the units during the month. Use the FIFO method of process costing. A) $76,500; $49,700 B) $0; $38,250 C) $60,000; $40,200 D) $39,000; $15,600
B
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) $28,250; $24,850 B) $27,000; $25,920 C) $40,000; $25,590 D) $27,500; $23,600
B
What is the amount of direct materials and conversion costs assigned to ending work in process using the weighted-average process-costing method? A) $26,720; $25,020 B) $44,000 $15,840 C) $83,600; $88,000 D) $88,000; $25,080
B
Abnormal spoilage totals ________. A) 3,200 units B) 8,000 units C) 5,120 units D) 2,880 units
C
Companies that attempt to achieve zero defects in the manufacturing process treat spoilage as ________. A) scrap B) reworked units C) abnormal spoilage D) indirect spoilage
C
Costs of abnormal spoilage are usually accounted for as ________. A) a deduction from the cost of goods sold B) a component of the costs of good units manufactured C) a separate line item in an income statement D) an asset on a balance sheet
C
Normal spoilage totals ________. A) 3,200 units B) 8,000 units C) 2,880 units D) 5,120 units
C
Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 3% of the good units. Data provided for February 2015 are as follows: WIP, beginning inventory 2/1/2015 51,000 units Direct materials (100% complete) Conversion costs (50% complete) Started during February 170,000 units Completed and transferred out 180,000 units WIP, ending inventory 2/28/2015 26,000 units Direct materials (100% complete) Conversion costs (25% complete) Costs: WIP, beginning inventory: Direct materials $ 280,000 Conversion costs 80,000 Direct materials added 408,000 Conversion costs added 264,000 24) What are the normal and abnormal spoilage units, respectively, for February when using FIFO? A) 2,800 units; 2,960 units B) 5,100 units; 3,280 units C) 5,400 units; 9,600 units D) 5,400 units; 15,000 units
C
Scrap is ________. A) units of production that do not meet the specifications required by customers but that are subsequently repaired and sold as good finished units B) products of a joint production process that have low total sales values relative to the total sales value of the main product C) residual material that results from manufacturing a product D) units of production whether fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices
C
Spoilage that is not inherent in a particular production process and would not arise under efficient operating conditions is referred to as ________. A) incremental spoilage B) usual spoilage C) abnormal spoilage D) indirect spoilage
C
The Peric Manufacturing Shop produces motorcycle parts. Typically, 12 pieces out of a job lot of 1,000 parts are spoiled. Costs are assigned at the inspection point, $40.00 per unit. Spoiled pieces may be disposed at $8.00 per unit. The spoiled goods must be inventoried appropriately when the normal spoilage is detected. The current job requires the production of 3,000 good parts. Which of the following journal entries would be correct if the spoilage occurred due to specifications required for Job 101? A) Work-in-Process Control 96 Materials Control 96 B) Materials Control 96 Work-in-Process Control 96 C) Materials Control 288 Work-in-Process Control 288 D) Work-in-Process Control 288 Materials Control 288
C
The loss from abnormal spoilage account would appear ________. A) on a balance sheet B) as a detailed item in the retained earnings schedule of a balance sheet C) a separate line item on an income statement D) a deduction from the cost of goods sold
C
What cost is allocated to abnormal spoilage using the weighted-average process-costing method? A) $ 0 B) $14,720 C) $39,936 D) $19,456
C
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) $66,500; $10,700 B) $60,000; $40,200 C) $62,400; $9,750 D) $39,000; $15,600
C
What is the amount allocated to the work-in-process ending inventory? A) $40,000 B) $50,000 C) $30,000 D) $75,000
C
What is the amount of direct materials and conversion costs assigned to ending work in process using the weighted-average process-costing method? A) $37,440; $48,000 B) $72,000; $44,460 C) $68,400; $46,800 D) $67,120; $44,320
C
What is the total cost per equivalent unit using the weighted-average method of process costing? A) $3.80 B) $3.60 C) $7.80 D) $4.00
C
What is the total costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped? Take into account the costs related to the completion of the conversion of the units during the month. Use the FIFO method of process costing. A) $38,250 B) $360,000 C) $398,250 D) $194,000
C
When the amount of scrap is immaterial, which of the following is the easiest accounting entry when recording scrap sold for cash? A) Sales of Scrap Cash B) Manufacturing Overhead Control Cash C) Cash Scrap Revenues D) Sales of scrap Accounts Receivable
C
When the amount of scrap is material and the scrap is sold immediately after it is produced, which of the following is the journal entry if the scrap attributable to a specific job is sold on account? A) Scrap Revenues Accounts Payable B) Work-in-Process Control Accounts Receivable C) Accounts Receivable Work-in-Process Control D) Work-in-Process Control Accounts Payable
C
Which of the following journal entries correctly represents the transfer of completed goods begun during February using the FIFO method of process costing? A) Finished Goods 503,100 Work in Process 503,100 B) Loss from Spoilage 37,440 Finished Goods 37,440 C) Finished Goods 922,410 Work in Process 922,410 D) Finished Goods 398,250 Work in Process 398,250
C
Early inspections can ________. A) prevent any further conversion costs being wasted on units that are already good B) increase conversion costs on units that are already spoiled C) increase any further costs being spent on units that are already spoiled D) prevent any further costs being wasted on units that are already spoiled
D
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 4% of the good fillets. Data for April 2015 are as follows: WIP, beginning inventory 4/1/2015 85,000 fillets Direct materials (100% complete) Conversion costs (50% complete) Started during April 130,000 fillets Completed and transferred out 4/31/2015 180,000 fillets WIP, ending inventory 4/31/2015 22,000 fillets Direct materials (100% complete) Conversion costs (20% complete) Costs for April: WIP, beginning Inventory: Direct materials $ 130,000 Conversion costs 95,910 Direct materials added 300,000 Conversion costs added 383,130 10) What is the number of total spoiled units? A) 16,000 units B) 7,000 units C) 15,000 units D) 13,000 units
D
If the rework is abnormal ________. A) it is debited to Wages Payable Control B) it is credited to Wages Payable Control C) it is credited to Loss from Abnormal Rework D) it is debited to Loss from Abnormal Rework
D
What costs would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing? A) $5,890; $9,133 B) $1,440; $4,800 C) $4,800; $2,640 D) $10,560; $2,640
D
What is the direct material cost assigned to good units completed? A) $150,000 B) $250,000 C) $120,000 D) $270,000
D
What is the total cost per equivalent unit using the weighted-average method of process costing? A) $4.00 B) $2.40 C) $2.00 D) $4.40
D
Which of the following correctly reflects what units passed inspection this period? Assume beginning work in process was completed and ending work in process was started during the period. Inspection Point at Completion Level 10% 50% 100% A) Beginning work in process (30% complete) No No Yes B) Started and completed No Yes Yes C) Ending work in process (40% complete) Yes No Yes D) Beginning work in process (5% complete) Yes Yes Yes
D
Which of the following is a journal entry to recognize the disposal value? A) Materials Control XXX Work-in-Process Control XXX Manufacturing Overhead Control XXX B) Work-in-Process Control XXX Manufacturing Overhead Control XXX Materials Control XXX C) Manufacturing Overhead Control XXX Work-in-Process Control XXX D) Materials Control XXX Work-in-Process Control XXX
D
Which of the following is an example of spoilage? A) short lengths from woodworking operations B) edges from plastic molding operations C) defective units of laptops detected after the production process but reworked before the units are sold as good products to customers D) defective aluminum cans sold to aluminum manufacturers for remelting to produce other aluminum products
D
Which of the following sentences is true of classification of spoilage as normal or abnormal when inventories are present? A) Classifying spoilage as normal rather than abnormal results in same current operating income. B) Classifying spoilage as normal rather than abnormal results in an decrease in current operating income. C) Classifying spoilage as abnormal rather than normal results in an increase in current operating income. D) Classifying spoilage as normal rather than abnormal results in an increase in current operating income.
D
Which of the following statements is true of normal spoilage? A) It is a spoilage which is not inherent in a particular production process. B) It occurs due to machine breakdowns and operator errors. C) It is usually regarded as avoidable and controllable. D) It arises even when the process is carried out in an efficient manner.
D
Which of the following statements is true of scrap? A) When a production process yields two or more products with high total sales values relative to the total sales values of other products, those are called scrap. B) For accounting purpose, distinction is made between normal and abnormal scrap. C) Scrap refers to units of production, fully or partially completed, that do not meet the specifications required by customers for good units and are discarded or sold at reduced prices D) Scrap is either sold or disposed of quickly or it is stored for later sale, disposal, or reuse.
D
Which one of the following conditions usually exists when comparing normal and abnormal spoilage to controllability? Normal Spoilage Abnormal Spoilage A) Controllable Controllable B) Controllable Uncontrollable C) Uncontrollable Uncontrollable D) Uncontrollable Controllable
D