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41
46) Weather Instruments assembles products from component parts. It has two departments that process
all products. During January, the beginning work in process in the assembly department was half
complete as to conversion and complete as to direct materials. The beginning inventory included $12,000
for materials and $4,000 for conversion costs. Overhead is applied at the rate of 50% of direct
manufacturing labor costs. Ending work-in-process inventory in the assembly department was 40%
complete. All spoilage is considered normal and is detected at the end of the process.
Beginning work in process in the finishing department was 75% complete as to conversion and ending
work in process was 25% converted. Direct materials are added at the end of the process. Beginning
inventories included $16,000 for transferred-in costs and $10,000 for direct manufacturing labor costs.
Overhead in this department is equal to direct manufacturing labor costs. Additional information about
the two departments follows:
Assembly Finishing
Beginning work-in-process units 20,000 24,000
Units started this period 40,000 ?
Units transferred this period 50,000 54,000
Ending work-in-process units 8,000 20,000
Material costs added $44,000 $28,000
Direct manufacturing labor $16,000 $24,000
Required:
Prepare a production cost worksheet using weighted-average for the assembly department and FIFO for
the finishing department.
47) The Duolane Pottery manufactures pottery products. All direct materials are included at the inception
of the production process. For April, there was no beginning inventory in the processing plant. Direct
materials totaled $180,000 for the month. Work-in-process records revealed that 3,000 tons were started in
April and that 2,100 tons were finished; 500 tons were spoiled as expected. Ending work-in-process units
are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.
Required:
a. What is the cost per equivalent unit?
b. What are the costs assigned to completed units?
c. What are the costs transferred out?
d. What are the amounts allocated to the work-in-process ending inventory?
48) Harriet has been reviewing the accounting system for her company and she is very concerned about
the accounting for spoilage. It appears that spoilage is accounted for only at the end of the processing
cycle. While this concept is acceptable in general, Harriet believes that a better method can be found to
properly account for the spoilage when it occurs. She believes that there must be something better than
the weighted-average method of accounting for spoilage. She would like the company to use a method
that provides closer tracking of the spoilage with the accounting for the spoilage.
Required:
Discuss the problems Harriet is having with the accounting system.
Objective 18.4
1) 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
2) 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
3) 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
4) 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
5) 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
6) 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
7) 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.
8) 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.
9) 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
10) In general, it is presumed that normal spoilage occurs halfway between the beginning of the
production process and the inspection point in the production cycle. This is because there is no easy way
to determine where the spoilage has happened until the inspection has occurred.
11) All accounting systems must assume that the inspection point occurs when a process is 100%
complete.
12) The downside to conducting inspections at too early a stage is that units spoiled at later stages of the
process may go undetected.
13) Firms often conduct multiple inspections to avoid instances of undetected spoiled units at later stages
of the process.
14) When spoiled goods have a disposal value, the net cost of spoilage is computed by adding the
disposal value to the costs of the spoiled goods accumulated to the inspection point.
15) Spoilage always occurs at beginning stages of a production process and can be detected only at the
end of process.
16) If a company inspects units only at the end of the production process, the units in ending work-in-
process inventory are not assigned any costs of normal spoilage.
17) The unit costs of normal and abnormal spoilage are the same when the two are detected at the same
inspection point.
18) How does inspecting at various stages of completion affect the amount of normal and abnormal
spoilage?
19) Why do firms often conduct multiple inspections?
20) What is the advantage and disadvantage of early inspections?
21) Spoilage can be a significant cost for many organizations. Discuss when spoilage might happen and
how the costs of normal spoilage get allocated.
Objective 18.5
1) 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
2) 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
3) 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
4) 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.
5) 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.
6) 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.
7) Costs of abnormal spoilage are NOT considered to be inventoriable costs and are written off as costs of
the accounting period in which the abnormal spoilage is detected.
8) When assigning costs, job-costing systems generally distinguish normal spoilage attributable to a
specific job from normal spoilage common to all jobs.
