978-0133428704 Chapter 18 Solution Manual Part 4

subject Type Homework Help
subject Pages 9
subject Words 1416
subject Authors Charles T. Horngren, Madhav V. Rajan, Srikant M. Datar

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Work in process, beginning (given)
Started during current period (given)
To account for
Good units completed and transferred out
during current period:
Normal spoilage (at 60% inspection point)
1,512 100%; 1,512 60%
Abnormal spoilage (at 60% inspection point)
288 100%; 288 60%
Work in process, ending(given)
3,600 100%; 3,600 70%a
Accounted for
Equivalent units of work done to date
2,400
12,000
14,400
9,000
1,512
288
3,600
14,400
9,000
1,512
288
3,600
14,400
9,000
907.2
172.8
2,520
12,600
aDegree of completion in this department: direct materials, 100%; conversion costs, 70%.
PANEL B: Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and
Assign Costs to the Units Completed, Spoiled Units, and Units in Ending Work-in-Process
Inventory
Total
Production
Costs
Direct
Materials
Conversion
Costs
$ 199,800
1,444,000
$1,639,800
$ 76,800
240,000
$316,800
$316,800
14,400
$ 22
$ 123,000
1,200,000
$1,323,000
$1,323,000
12,600
$ 105
$1,143,000
128,520
1,271,520
24,480
343,800
$1,639,800
(9,000 $22) +
(1,512 22) +
(288 22) +
(3,600 22) +
$316,800 +
(9,000 105)
(907.2 105)
(172.8 105)
(2,520 105)
$1,323,000
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Work in process, beginning (20%)*
Started during March
To account for
2,200
21,000
23,200
2,200
21,000
23,200
2,200
21,000
23,200
Good units completed and transferred out
Normal spoilage
19,500a
1,152b
19,500a
1,284c
19,500a
1,170d
Abnormal spoilage (1,800 Normal spoilage)
Work in process, ending (70%)*
Accounted for
648
1,900
23,200
516
1,900
23,200
630
1,900
23,200
*Degree of completion for conversion costs at the dates of the work-in-process inventories
a2,200 beginning inventory + 21,000 1,800 spoiled 1,900 ending inventory = 19,500.
b6% (21,000 units started 1,800 units spoiled) = 6% 19,200 = 1,152; beginning work-in-process inventory is
excluded because it was already 20% complete at March 1 and past the inspection point.
c6% (23,200 units 1,800) = 6% 21,400 = 1,284 because all units passed the 40% completion inspection point in
March.
d6% 19,500 = 1,170 because 19,500 units are fully completed and inspected during March.
18-40 (20 min.) Job costing, rework.
Avid Corporation manufactures a sophisticated controller that is compatible with a variety of
gaming consoles. Excluding rework costs, the cost of manufacturing one controller is $220. This
consists of $120 in direct materials, $24 in direct manufacturing labor, and $76 in manufacturing
overhead. Maintaining a reputation for quality is critical to Avid. Any defective units identified at
the inspection point are sent back for rework. It costs Avid $72 to rework each defective controller,
including $24 in direct materials, $18 in direct manufacturing labor, and $30 in manufacturing
overhead.
In August 2014, Avid manufactured 1,000 controllers, 80 of which required rework. Of these
80 controllers, 50 were considered normal rework common to all jobs and the other 30 were
considered abnormal rework.
Required:
1. Prepare journal entries to record the accounting for both the normal and abnormal rework.
2. What were the total rework costs of controllers in August 2014?
3. Suppose instead that the normal rework is attributable entirely to Job #9, for 200 controllers
intended for Australia. In this case, what are the total and unit costs of the good units produced
for that job in August 2014? Prepare journal entries for the manufacture of the 200 controllers,
as well as the normal rework costs.
SOLUTION
1. Manufacturing Overhead Control (rework costs) 3,600
Materials Control ($24 50) 1,200
Wages Payable ($18 50) 900
Manufacturing Overhead Allocated ($30 50) 1,500
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Normal spoilage on ending WIP**
5,000 100%; 5,000 0%; 5,000 80%
Abnormal spoilage
7,500 100%; 7,500 0%; 7,500 80%
Accounted for
Equivalent units of work done to date
5,000
7,500
200,000
5,000
7,500
200,000
0
0
175,000
4,000
6,000
192,500
*Normal spoilage is 10% of good units that pass inspection: 10% 125,000 = 12,500 units. Degree of completion of normal
spoilage in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 80%.
Degree of completion in this department: transferred-in costs, 100%; direct materials, 100%; conversion costs, 95%.
**Normal spoilage is 10% of the good units in ending WIP that have passed the inspection point, 10% 50,000 = 5,000 units.
Degree of completion of normal spoilage in this department: transferred-in costs, 100%; direct materials, 0%; conversion
costs, 80%.
Abnormal spoilage = Actual spoilage Normal spoilage = 25,000 17,500 = 7,500 units. Degree of completion of abnormal
spoilage in this department: transferred-in costs, 100%; direct materials, 0%; conversion costs, 80%.
PANEL B: Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and
Assign Costs to the Units Completed, Spoiled Units, and Units in Ending Work-in-Process
Inventory
Total
Production
Costs
Transferred-
in Costs
Direct
Materials
Conversion
Costs
(Step 3) 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
(Step 5) Assignment of costs
Good units completed and transferred out
(125,000 units)
$ 312,250
6,385,750
$6,698,000
$ 207,250
1,618,750
$1,826,000
$1,826,000
200,000
$ 9.13
$
1,638,000
$1,638,000
$1,638,000
175,000
$ 9.36
$ 105,000
3,129,000
$3,234,000
$3,234,000
192,500
$ 16.80
Costs before adding normal spoilage
Normal spoilage (12,500 units)
(A) Total costs of good units completed
and transferred out
(B) Abnormal spoilage (7,500 units)
Work in process, ending (50,000 units)
WIP ending, before normal spoilage
Normal spoilage on ending WIP
(C) Total costs of ending WIP
(A)+(B)+(C) Total costs accounted for
$4,411,250
282,125
4,693,375
169,275
1,722,500
112,850
1,835,350
$6,698,000
125,000# ($9.13 + $9.36 + $16.80)
(12,500# $9.13) + (0# $9.36) + (10,000# $16.80)
(7,500# $9.13) + (0# $9.36) + (6,000# $16.80)
(50,000# $9.13) + (50,000# $9.36) + (47,500# $16.80)
(5,000# $9.13) + (0# $9.36) + (4,000# $16.80)
$1,826,000 + $1,638,000 + $3,234,000
#Equivalent units of transferred-in costs, direct materials, and conversion costs calculated in Step 2 in Panel A.
2. The issues related to the determination of the percentage of spoilage considered normal
are similar to the factors discussed in Chapter 17 regarding the importance of verifying the
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