Spoilage, Rework, and Scrap

Managers learn found that improved tint and intolerance for high despoilation have lowered overall apostrophize and increased gross barters. 18-2 despoilment social social social building blocks of exertion that do non meet the models required by customers for entire unit of measurement of measurements and that ar discarded or sold at decreased prices. Re acidulateplaceunits of production that do not meet the ad hocations required by customers hardly which ar subsequently repaired and sold as earnest absolute units. Scrapresidual actual that results from manufacturing a product. It has low supply sales value comp ared to the aggregate sales value of the product. 8-3Yes. ordinary despoilment is spoilation inherent in a peculiar(a) production figure by that arises dismantle downstairs efficient operating conditions. Management decides the despoliation enjoin it considers public dep culture on the production touch on. 18-4Ab popular spoiling is despoliation that is not inherent in a transgressicular production help and would not arise under efficient operating conditions. speak to of sub figure spoil are preoccupied appeal, measures of inefficiency that should be written off posely as losses for the write up end. 18-5Management effort can affect the despoilment rate.Many companies are relentlessly decrease their rates of recipe despoilation, spurred on by competitors who, likewise, are continuously minify embody. 18-6 practice spoliation typically is expressed as a percentage of good units passing the inspection catamenia. Given actual louse up units, we infer aberrant spoiling as follows Ab convening spoilation = developed spoil frequent spoliation 18-7 computeinging for bobble goods deals with address denomination, rather than with apostrophize incurrence, because the existence of spoiled goods does not involve any additional damage beyond the substance already incurred. 18-8Yes. chemic al formula spoliation rates should be computed from the good knocked forbidden(p)put or from the design infix, not the check input. expression spoiling is a minded(p)(p) percentage of a certain let onput base. This base should neer implicate ab principle spoil, which is take ond in total input. deviant despoilment does not vary in require proportion to units produced, and to include it would cause the expression spoilation count to fluctuate irregularly and not vary in submit proportion to the appearput base. 18-9Yes, the point of inspection is the key to the assignment of despoilation be. radiation diagram spoil personify do not link up solely to units transferred come bulge of the closet.Thus, if units in terminate head for the hills in mould have passed inspection, they should have habitual spoliation follow added to them. 18-10No. If ab honey oilplace spoliation is detected at a different point in the production troll than usual spoilage, then unit be would differ. If, however prevalent and vicarious spoilage are detected at the same point in the production cycle, their unit be would be the same. 18-11No. spoilation whitethorn be considered a normal characteristic of a given production cycle. The be of normal spoilage caused by a random malfunction of a machine would be super supercharged as a part of the manufacturing hit allocated to all commercial enterprises.Normal spoilage attributable to a specific contemplate is charged to that traffic. 18-12 No. Unless there are special reasons for charging normal redo to jobs that contained the naughtily units, the be of extra materials, tote, and so on are usually charged to manufacturing command swear outing strike and allocated to all jobs. 18-13Yes. freakish survey is a loss middling like affected spoilage. By charging it to manufacturing overhead, the abnormal rework cost are spread over other jobs and also included in stock-taking to the extent a job is not complete. affected rework is rework over and above what is expected during a layover, and is loved as a loss for that menstruum. 8-14A company is justified in catalogueing crank when its estimated last-place realizable value is significant and the while between storing it and selling or re utilise it is quite long. 18-15Company managements measure eccentric person to measure efficiency and to also constraint a tempting source of theft. Managements of companies that report high levels of scrap commission attention on ways to reduce scrap and to use the scrap the company generates more profitably. Some companies, for example, might redesign products and branches to reduce scrap. Others may also examine if the scrap can be reprocessd to save firm input be. 8-16(510 min. ) Normal and abnormal spoilage in units. 1. do spoiled units12,000 Normal spoilage in units, 5% ( 132,000 6,600 freakish spoilage in units 5, cd 2. brachydactylous spoilage, 5, cd ( $10$ 54 ,000 Normal spoilage, 6,600 ( $10 66,000 Potential savings, 12,000 ( $10$long hundred,000 get wordless 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 escort 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) cost of lease materials. 18-17(20 min. )Weighted-average method, spoilage, same units. resolving power pose 18-17 calculates same units of work do to hear for rent materials and innovation cost. radical give 18-17 add widening in material Units and number production in same Units Weighted-Average method of knead saluteing with Spoilage, grey Manufacturing Company for November 2006. ( whole step 1) ( footfall 2) combining weight Units Physical need transmutation Flow of takings Units Materials cost produce in process, starting (given) 1,000 Started during true gunpoint 10,150a To aim for 11,150 trusty units unblemished and transferred step up during genuine dot 9,000 9,000 9,000 Normal spoilage* nose candy cytosine ( vitamin C% degree centigrade ( ascorbic acid% vitamin C century freakish spoilage 50 50 ( ascorbic acid% 50 ( hundred% 50 50 knead in process, destination (given) 2,000 2,000 ( cytosine% 2,000 ( 30% 2,000 600 sexual conquested for 11,150 naturalize do to date 11,150 9,750 a From below, 11,150 total units are postinged for. Therefore, units started during flow flow must(prenominal) be = 11,150 1,000 = 10,150. * tier of utmost of normal spoilage in this division post materials, blow% regeneration cost, carbon%. decimal point of expiration of abnormal spoilage in this incision coordinate materials, coke% transmutatio n be, nose candy%. peak of finish in this segment carry materials, hundred% variety cost, 30%. 18-18(20(25 min. Weighted-average method, grant cost (continuation of 18-17). issue exhibit 18-18 calculates the cost per eq unit for come out materials and novelty be, summarizes total be to calculate for, and assigns these cost to units spotless and transferred bulge aside (including normal spoilage), to abnormal spoilage, and to units in oddment work in process. firmness award 18-18 rate Cost per similar Unit, resume native be to draw For, and say fall cost to Units Completed, to fluff Units, and to Units in show upcome function in Process Weighted-Average method of Process be, Gray Manufacturing Company, November 2006. make out labor necessitate metempsychosis be Materials be ( clapperclaw 3) feat in process, start (given) $ 2,533 $ 1,423 $ 1,110 cost added in stopover halt (given) 39,930 12,180 27,750 be incurred to date 13,60 3 28,860 divided by combining weight units of work make to date (11,150 ( 9,750 Cost per akin unit $ 1. 22 $ 2. 6 (Step 4) totality be to account for $42,463 (Step 5) date of be upright units accomplished and transferred out (9,000 units) cost in the lead adding normal spoilage $37,620 (9,000 ( $1. 22) + (9,000 ( $2. 96) Normal spoilage ( degree centigrade units) 418 ( degree Celsius ( $1. 22) + ( hundred ( $2. 96) (A) full(a) cost of good units accurate & transf. out 38,038 (B) Abnormal spoilage (50 units) 209 (50 ( $1. 22) + (50 ( $2. 96) (C) plump in process, mop up (2,000 units) 4,216 (2,000 ( $1. 22) + (600 ( $2. 6) (A)+(B)+(C) rack up be accounted for $42,463 tant derive(predicate) units of direct materials and passage cost cipher in Step 2 in dissolver render 18-17. 18-19(15 min. )FIFO method, spoilage, alike units. Solution face 18-19 calculates similar units of work do in the topical degree for direct materials and transi tion costs. reply register 18-19 iterate issue in Physical Units and Compute push throughput in resembling Units First-in, First-out (FIFO) Method of Process be with Spoilage, Gray Manufacturing Company for November 2006. (Step 2) (Step 1) akin Units Physical need diversity Flow of action Units Materials cost fly the coop in process, graduation exercise (given) 1,000 Started during menstruum period 10,150a To account for 11,150 well(p) units finish and transferred out during current period From root word work in process 1,000 1,000 ( ( ampere-second% ( ascorbic acid%) 1,000 ( ( light speed% ( 50%) 0 d Started and accomplished 8,000 8,000 ( 100% 8,000 ( 100% 8,000 8,000 Normal spoilage* 100 100 ( 100% 100 ( 100% 100 100 Abnormal spoilage 50 50 ( 100% 50 ( 100% 50 50 live on in process, ending 2,000 2,000 ( 100% 2,000 ( 30% 2,000 600 Accounted for 11,150 formulate make in current period only 10,150 9,250 a From be low, 11,150 total units are accounted for.Therefore, units started during current period must be 11,150 1,000 = 10,150. spot of closedown in this surgical incision direct materials, 100% transition costs, 50%. 9,000 animal(prenominal) units consummate and transferred out minus 1,000 physical units effected and transferred out from graduation work-in-process inventory. * grade of terminus of normal spoilage in this section direct materials, 100% spiritual rebirth costs, 100%. mark of design of abnormal spoilage in this division direct materials, 100% conversion costs, 100%. point in prison term of completion in this subdivision direct materials, 100% conversion costs, 30%. 18-20(20(25 min. )FIFO method, assigning costs (continuation of 18-19).Solution adjoin 18-20 calculates the costs per equivalent unit for direct materials and conversion costs, summarizes total costs to account for, and assigns these costs to units undefiled and transferred out (including normal s poilage), to abnormal spoilage, and to units in ending work in process. SOLUTION EXHIBIT 18-20 Compute Cost per Equivalent Unit Costs, reiterate issue forth Costs to Account For, and dispense substance Costs to Units Completed, to sorry Units, and to Units in endpoint Work in Process FIFO Method of Process cost, Gray Manufacturing Company, November 2006. Total achievement localise Conversion Costs Materials Costs (Step 3) Work in process, jump (given $1,423 + $1,110) $ 2,533 Costs added in current period (given) 39,930 $12,180 $27,750 shared by equivalent units of work through with(p) in current period (10,150 ( 9,250 Cost per equivalent unit ______ $ 1. 0 $ 3 (Step 4) Total costs to account for $42,463 (Step 5) subsidization of costs Good units holy and transferred out (9,000 units) Work in process, beginning (1,000 units) $ 2,533 Costs added to beg. work in process in current period 1,500 (0a ( $1. 0) + (500a ( $3) Total from beginning inv entory before normal spoilage Started and realised before normal spoilage (8,000 units) 4,033 Normal spoilage (100 units) 33,600 (8,000a ( $1. 20) + (8,000a ( $3) (A) Total costs of good units completed and transferred out 420 (100a ( $1. 20) + (100a ( $3) (B) Abnormal spoilage (50 units) 38,053 (C) Work in process, ending (2,000 units) 210 (50a ( $1. 0) + (50a ( $3) (A)+(B)+(C) Total costs accounted for 4,200 (2,000a ( $1. 20) + (60a ( $3) $42,463 a Equivalent units of direct materials and conversion costs calculated in Step 2 in Solution Exhibit 18-19. 18-21(30 min. )Weighted-average method, spoilage. 1. Solution Exhibit 18-21A calculates equivalent units of work make in the current period for direct materials and conversion costs. SOLUTION EXHIBIT 18-21A tot output in Physical Units and Compute Output in Equivalent Units Weighted-Average Method of Process Costing with Spoilage, Appleton Company for majestic 2006. (Step 1) (Step 2) Equivalent Units Flow of employment Physical Units control Conversion Materials Costs Work in process, beginning (given) 2,000 Started during current period (given) 10,000 To account for 12,000 Good units completed and tsfd. out during current period 9,000 9,000 9,000 Normal spoilagea 900 (900 pic100% 900 pic100%) 900 900 Abnormal spoilageb three hundred (ccc pic100% ccc pic100%) 300 300 Work in process, endingc (given) 1,800 (1,800 pic 100% 1,800 pic 75%) ______ 1,800 1,350 Accounted for 12,000 Work done to date 12,000 11,550 aNormal spoilage is 10% of good units transferred out 10% ? 9,000 = 900 units. point in time of completion of normal spoilage in this section direct materials, 100% conversion costs, 100%. bTotal spoilage = Beg. units + Units started Good units tsfd. out Ending units = 2,000 + 10,000 9,000 1,800 = 1,200 Abnormal spoilage = Total spoilage Normal spoilage = 1,200 900 = 300 units. Degree of completion of abnormal spo ilage in this segment direct materials, 100% conversion costs, 100%. cDegree of completion in this incision direct materials, 100% conversion costs, 75%. 2 & 3. Solution Exhibit 18-21B calculates the costs per equivalent unit for direct materials and conversion costs, summarizes total costs to account for, and assigns these costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process, apply the weighted-average method. SOLUTION EXHIBIT 18-21B Compute Cost per Equivalent Unit, tote up Total Costs to Account For, and Assign Total Costs to Units Completed, to foul up Units, and to Units in Ending Work in Process Weighted-Average Method of Process Costing, Appleton Company, August 2006. Total get up Conversion fruit Materials Costs Costs (Step 3) Work in process, beginning (given) $ 28,600 $17,700 $ 10,900 Costs added in current period (given) 174,300 81,300 93,000 Costs incurred t o date $99,000 $103,900 Divide by equivalent units of work done to date pic12,000 pic11,550 Cost per equivalent unit _______ $ 8. 250 $ 8. 957 (Step 4) Total costs to account for $202,900 (Step 5) date of costs Good units completed and transferred out (9,000 units) Costs before adding normal spoilage $155,211 (9,000d pic$8. 25) + (9,000 d pic$8. 957) Normal spoilage (900 units) 15,521 (900d pic$8. 25) + (900d pic$8. 9957) (A) Total costs of good units completed and transferred out 170,732 (B) Abnormal spoilage (300 units) 5,174 (300d pic $8. 25) + (300d pic $8. 9957) (C) Work in process, ending (1,800 units) 26,994 (1,800d pic$8. 25) + (1,350d pic$8. 957) (A) + (B) + (C) Total costs accounted for $202,900 dEquivalent units of direct materials and conversion costs calculated in tone of voice 2 of Solution Exhibit 18-21A. 18-22 (30 min. )FIFO method, spoilage. 1. Solution Exhibit 18-22A calculates equivalent units of work done in the current period for direct materials and conversion costs. SOLUTION EXHIBIT 18-22A Summarize Output in Physical Units and Compute Output in Equivalent Units FIFO Method of Process Costing with Spoilage, Appleton Company for August 2006. (Step 1) (Step 2) Equivalent Units Flow of Production Physical Units Direct Conversion Costs Materials Work in process, beginning (given) 2,000 Started during current period (given) 10,000 To account for 12,000 Good units completed and transferred out during current period From beginning work in process a 2,000 2,000 ? (100% 100%) 2,000 ? 100% 50%) 0 1,000 Started and completed 7,000b (7,000 ? 100% 7,000 ? 100%) 7,000 7,000 Normal spoilagec 900 (900 ? 100% 900 ? 100%) 900 900 Abnormal spoilaged 300 (300 ? 100% 300 ? 00%) 300 300 Work in process, endinge (given) 1,800 (1,800 ? 100% 1,800 ? 75%) 1,800 1,350 Accounted for 12,000 _____ Work done in current period only 10 ,000 10,550 a Degree of completion in this segment direct materials, 100% conversion costs, 50%. b 9,000 physical units completed and transferred out minus 2,000 physical units completed and transferred out from beginning work-in-process inventory. c Normal spoilage is 10% of good units transferred out 10% ? 9,000 = 900 units. Degree of completion of normal spoilage in this department direct materials, 100% conversion costs, 100%. d Total spoilage = Beg. units + Units started Good units tsfd. Out ending units = 2,000 + 10,000 9,000 1,800 = 1,200 Abnormal spoilage = real(a) spoilage Normal spoilage = 1,200 900 = 300 units. Degree of completion of abnormal spoilage in in this department direct materials, 100% conversion costs, 100%. e Degree of completion in this department direct materials, 100% conversion costs, 75%. 2 & 3. Solution Exhibit 18-22B calculates the costs per equivalent unit for direct materials and conversion costs, summarizes total costs to account for, and assigns these costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process, victimisation the FIFO method. SOLUTION EXHIBIT 18-22B Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process FIFO Method of Process Costing, Appleton Company, August 2006. Total Direct Conversion Production Materials Costs Costs (Step 3) Work in process, beginning (given) ($17,700 + $10,900) $ 28,600 Costs added in current period (given) 174,300 $ 81,300 $93,000 Divide by equivalent units of work done in current period pic10,000 pic10,550 Cost per equivalent unit $ 8. 130 $ 8. 152 (Step 4) Total costs to account for $202,900 (Step 5) naming of costs Good units completed and transferred out (9,000 units) Work in process, beginning (2,000 units) $ 28,600 Costs added to beg. work in process in current period 8,815 (0f ? $8. 13) + (1,000f ? $8. 152) Total from beginning inventory before normal spoilage 37,415 Started and completed before normal spoilage (7,000 units) 118,616 (7,000f ? $8. 13) + (7,000f ? $8. 8152) Normal spoilage (900 units) 15,521 (900f ? $8. 13) + (900f ? $8. 8152) (A) Total costs of good units completed and transferred out 171,282 (B) Abnormal spoilage (300 units) 5,084 (300f ? $8. 13) + (300f ? $8. 8152) (C) Work in process, ending (1,800 units) 26,534 (1,800f ? $8. 13) + (1,350f ? $8. 152) (A) + (B) + (C) Total costs accounted for $202,900 fEquivalent units of direct materials and conversion costs calculated in step 2 in Solution Exhibit 18-22A. 18-23 (30 min. ) Standard-cost method, spoilage. 1. Solution Exhibit 18-23A calculates equivalent units of work done in the current period for direct materials and conversion costs. (It is the same as Solution Exhibit 18-22A. ) SOLUTION EXHIBIT 18-23A Summarize Output in Physical Units and Compute Output in Equivalent Units Standard Costing Method of Process Costing with Spoilage, Appleton Company for August 2006. (Step 1) (Step 2) Equivalent Units Flow of Production Physical Units Direct Conversion Costs Materials Work in process, beginning (given) 2,000 Started during current period (given) 10,000 To account for 12,000 Good units completed and transferred out during current period From beginning work in process a 2,000 2,000 ? (100% 100%) 2,000 ? 100% 50%) 0 1,000 Started and completed 7,000b (7,000 ? 100% 7,000 ? 100%) 7,000 7,000 Normal spoilagec 900 (900 ? 100% 900 ? 100%) 900 900 Abnormal spoilaged 300 (300 ? 100% 300 ? 00%) 300 300 Work in process, endinge (given) 1,800 (1,800 ? 100% 1,800 ? 75%) 1,800 1,350 Accounted for 12,000 Work done in current period only 10,000 10,550 a Degree of completion in this depart ment direct materials, 100% conversion costs, 50%. b 9,000 physical units completed and transferred out minus 2,000 physical units completed and transferred out from beginning work-in-process inventory. c Normal spoilage is 10% of good units transferred out 10% ? 9,000 = 900 units. Degree of completion of normal spoilage in this department direct materials, 100% conversion costs, 100%. d Total spoilage = Beg. units + Units started Good units tsfd. Out ending units = 2,000 + 10,000 9,000 1,800 = 1,200 Abnormal spoilage = Actual spoilage Normal spoilage = 1,200 900 = 300 units. Degree of completion of abnormal spoilage in in this department direct materials, 100% conversion costs, 100%. e Degree of completion in this department direct materials, 100% conversion costs, 75%. 2 & 3. Solution Exhibit 18-23B calculates the costs per equivalent unit for direct materials and conversion costs, summarizes total costs to account for, and assigns these costs to units complet ed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process, using standard costing. SOLUTION EXHIBIT 18-23B Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process Standard Costing Method of Process Costing, Appleton Company, August 2006. Total Direct Conversion Production Materials Costs Costs (Step 3) Standard cost per equivalent unit (given) $ 17. 50 $8. 00 $9. 50 Work in process, beginning (given) $ 25,500 (2,000 ? $8. 00) + (1,000 ? $9. 50) Costs added in current period at standard prices 180,225 (10,000 ? $8. 00) + (10,550 ? $9. 0) (Step 4) Total costs to account for $205,725 (Step 5) date of costs at standard costs Good units completed and transferred out (9,000 units) Work in process, beginning (2,000 units) $ 25,500 Costs added to beg. work in process in current pe riod 9,500 (0f ? $8. 00) + (1,000f ? $9. 50) Total from beginning inventory before normal spoilage 35,000 Started and completed before normal spoilage (7,000 units) 122,500 (7,000f ? $8. 00) + (7,000f ? $9. 50) Normal spoilage (900 units) 15,750 (900f ? $8. 00) + (900f ? $9. 0) (A) Total costs of good units completed and transferred out 173,250 (B) Abnormal spoilage (300 units) 5,250(300f ? $8. 00) + (300f ? $9. 50) (C) Work in process, ending (1,800 units) 27,225 (1,800f ? $8. 00) + (1,350f ? $9. 50) (A) + (B) + (C) Total costs accounted for $205,725 f Equivalent units of direct materials and conversion costs calculated in step 2 in Solution Exhibit 18-23A. 18-24(25 min. ) Weighted-average method, spoilage. 1. Solution Exhibit 18-24, card A, calculates the equivalent units of work done to date for for individually one cost family line in family line 2006. 2. & 3.Solution Exhibit 18-24, panel B, calculates the costs per equivalent unit for distrib utively cost category, summarizes total costs to account for, and assigns these costs to units completed (including normal spoilage), to abnormal spoilage, and to units in ending work in process using the weighted-average method. SOLUTION EXHIBIT 18-24 Weighted-Average Method of Process Costing with Spoilage Superchip, September 2006. gore A stairs 1 and 2Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) (Step 2) Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process, beginning (given) 400 Started during current period (given) 1,700 To account for 2,100 Good units completed and transferred out during current period 1,400 1,400 1,400 Normal spoilage* 210 210 ( 100% 210 ( 100% 210 210 Abnormal spoilage one hundred ninety 190 ( 100% 190 ( 100% 190 190 Work in process, ending (given) 300 300 ( 100% 300 ( 40% 300 120 Accounted for 2,100 Work done to date 2,100 1,920 *Normal spoilage is 15% of good units transferred out 15% ? 1,400 = 210 units.Degree of completion of normal spoilage in this department direct materials, 100% conversion costs, 100%. Total spoilage = 400 + 1,700 1,400 300 = 400 units Abnormal spoilage = Total spoilage ( Normal spoilage = 400 ( 210 = 190 units. 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, 40%. SOLUTION EXHIBIT 18-24 PANEL B go 3, 4, and 5Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process Total Production Direct Conversion Costs Materials Costs (Step 3) Work in process, beginning (given) $ 74,200 $ 64,000 $ 10,200 Costs added in current period (given) 531,600 378,000 153,600 Costs incurred to date $442,000 $163,800 Divided by equivalent units of work done to date ( 2,100 ( 1,920 Cost per equivalent unit costs of work done to date $210. 476 $85. 125 (Step 4) Total costs to account for $605,800 (Step 5) Assignment of costs Good units completed and transferred out (1,400 units) Costs before adding normal spoilage $414,104 (1,400( $210. 476) + (1,400( $85. 3125) Normal spoilage (210 units) 62,116 (210 ( $210. 476) + (210 ( $85. 125) (A) Total cost of good units completed and transferred out (B) Abnormal spoilage (190 units) 476,220 (C) Work in process, ending (300 units) 56,199 (190 ( $210. 476) + (190 ( $85. 3125) (A)+(B)+(C) Total costs accounted for 73,381 (300 ( $210. 476) + (120 ( $85. 3125) $605,800 Equivalent units of direct materials and conversion costs calculated in Step 2 in control panel A. 8-25 (25 min. ) FIFO method, spoilage. 1. Solution Exhibit 18-25, adorn A, calculates the equivalent units of work done in the current period for each cost category in September 2006. 2. & 3. Solu tion Exhibit 18-25, embellish B, calculates the costs per equivalent unit for each cost category, summarizes the total cow dung segment costs for September 2006, and assigns these costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process under the FIFO method. SOLUTION EXHIBIT 18-25 First-in, First-out (FIFO) Method of Process Costing with Spoilage Superchip, September 2006.PANEL A Steps 1 and 2Summarize 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 rocess, beginning (given) 400 Started during current period (given) 1,700 To account for 2,100 Good units completed and transferred out during current period From beginning work in process 400 400 ( (100% (100%) 400 ( (100% ( 30%) 0 280 Started and completed 1,000 1,000 ( 100% 1,000 ( 100% 1,000 1,0 00 Normal spoilage* 210 210 ( 100% 210 ( 100% 210 210 Abnormal spoilage 190 190 ( 100% 190 ( 100% 190 190 Work in process, ending 300 300 ( 100% 300 ( 40% 300 120 Accounted for 2,100 Work done in current period only 1,700 1,800 Degree of completion in this department direct materials, 100% conversion costs, 30%. 1,400 physical units completed and transferred out minus 400 physical units completed and transferred out from beginning work in process inventory. Normal spoilage is 15% of good units transferred out 15% ( 1,400 = 210 units. Degree of completion of normal spoilage in this department direct materials, 100% conversion costs, 100%. Abnormal spoilage = Actual spoilage ( Normal spoilage = 400 ( 210 = 190 units. 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, 40%. SOLUTION EXHIBIT 18-25 PANEL B Steps 3, 4 and 5Compute Co st per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process Total Production Direct Conversion Costs Materials Costs (Step 3) Work in process, beginning, $64,000 + $70,200 (given) $ 74,200 Costs added in current period (given) 531,600 378,000 153,600 Divided by equivalent units of work done in current period ( 1,700 ( 1,800 Cost per equivalent unit $222. 353 $ 85. 33 (Step 4) Total costs to account for $605,800 (Step 5) Assignment of costs Good units completed and transferred out (1,400 units) Work in process, beginning (400 units) $ 74,200 Costs added beg. work in process in current period 23,893 (0 ( $222. 353) + (280 ( $85. 33) Total from beginning inventory before normal spoilage Started and completed before normal spoilage 98,093 (1,000 units) Normal spoilage (210 units) 307,686 (1,000($222. 353) + (1,000($85. 333) (A) Total costs of go od units completed and 64,614 (210($222. 353) + (210($85. 333) transferred out (B) Abnormal spoilage (190 units) 470,393 (C) Work in process, ending (300 units) 58,461 (190($222. 353) + (190($85. 33) (A)+(B)+(C) Total costs accounted for 76,946 (300($222. 353) + (120( $85. 333) $605,800 Equivalent units of direct materials and conversion costs calculated in Step 2 in grace A. 18-26 (30 min. ) Standard costing method, spoilage. 1. Solution Exhibit 18-25, Panel A, shows the computation of the equivalent units of work done in September 2006 for direct materials (1,700 units) and conversion costs (1,800 units). (This computation is the same for FIFO and standard-costing. ) 2.The direct materials cost per equivalent unit of beginning work in process and of work done in September 2006 is the standard cost of $210 given in the problem. The conversion cost per equivalent unit of beginning work in process and of work done in September 2006 is the standard cost of $80 given in the problem. 3. Solution Exhibit 18-26 summarizes the total costs to account for, and assigns these costs to units completed (including normal spoilage), to abnormal spoilage, and to units in ending work in process using the standard costing method. SOLUTION EXHIBIT 18-26 Standard Costing Method of Process Costing with Spoilage Superchip, September 2006.Steps 3, 4, and 5Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process Total Production Direct Conversion Costs Materials Costs (Step 3) Standard costs per equivalent unit (given) $ 290 $ 210 $ 80 Work in process, beginning* 93,600 (400 ( $210) + (120 ( $80) Costs added in current period at standard prices 501,000 (1,700 ( $210) + (1,800 ( $80) (Step 4) Costs to account for $594,600 (Step 5) Assignment of costs at standard costs Good units completed and transferred out (1,400 units) Work in pr ocess, beginning (400 units) $ 93,600 Costs added beg. ork in process in current period 22,400 (0 ( $210) + (280 ( $80) Total from beginning inventory before normal spoilage 116,000 Started and completed before normal spoilage (1,000 units) 290,000 (1,000 ( $210) + (1,000 ( $80) Normal spoilage (210 units) 60,900 (210 ( $210) + (210 ( $80) (A) Total costs of good units completed and transferred out 466,900 (B) Abnormal spoilage (190 units) 55,100 (190 ( $210) + (190 ( $80) (C) Work in process, ending (300 units) 72,600 (300 ( $210) + (120 ( $80) (A)+(B)+(C) Total costs accounted for $594,600 *Work in process, beginning has 400 equivalent units (400 physical units (100%) of direct materials and 120 equivalent units (400 physical units ( 30%) of conversion costs. Equivalent units of direct materials and conversion costs calculated in Step 2 in Solution Exhibit 18-25, Panel A. 18-27(2030 min. )Spoilage and job costing. 1. money 200 Loss from Abnormal Spoilage1,00 0 Work-in-Process witness1,200 Loss = ($6. 00 ( 200) $200 = $1,000 Remaining shifts cost = $6. 00 per case.The cost of these cases is unaffected by the loss from abnormal spoilage. 2. a. Cash 400 Work-in-Process tone down 400 The cost of the remaining good cases = ($6. 00 ( 2,500) $400 = $14,600 The unit cost of a good case today becomes $14,600 ( 2,300 = $6. 3478 b. Cash 400 Manufacturing division command overhead crack800 Work-in-Process train1,200 The unit cost of a good case remains at $6. 00. 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. In 2b however, normal spoilage is due to the production process, not the particular attributes of this specific job.These costs are, therefore, charged as part of manufacturing overhead and the manufacturing overhead cost of $1 per case already includes a provision for normal spoilage. 3. a. Work-in-Process Control 200 Material s Control, Wages collectible Control, Manufacturing Overhead Allocated 200 The cost of the good cases = ($6. 00 ( 2,500) + $200 = $15,200 The unit cost of a good case is $15,200 ( 2,500 = $6. 08 b. Manufacturing subdivision Overhead Control 200 Materials Control, Wages Payable Control, Manufacturing Overhead Allocated200 The unit cost of a good case = $6. 00 per case c. 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.In 3b however, normal rework is due to the production process, not the particular attributes of this specific job. These costs are, therefore, charged as part of manufacturing overhead and the manufacturing overhead cost of $1 per case already includes a provision for this normal rework. 18-28(15 min. ) Reworked units, costs of rework. 1. The two alternative approaches to account for the materials costs of reworked units are a. To charge the costs of rework to the curr ent period as a separate write off full point as abnormal rework. This approach would highlight to White Goods the costs of the supplier problem. b. To charge the costs of the rework to manufacturing overhead as normal rework. 2.The $50 tumbler cost is the cost of the actual tumblers included in the washing machines. The $44 tumbler units from the new supplier were eventually never used in any washing machine and that supplier is now bankrupt. The units must now be disposed of at zero temperament value. 3. The total costs of rework due to the defective tumbler units include the following a. the labor and other conversion costs spent on substituting the new tumbler units b. the costs of any extra negotiations to guard the replacement tumbler units c. any higher price the existing supplier may have charged to do a rush companionship for the replacement tumbler units and d. rdering costs for the replacement tumbler units. 18-29(25 min. )Scrap, job costing. 1. daybook entry to re cord scrap generated by a specific job and accounted for at the time scrap is sold is Cash or Accounts Receivable490 Work-in-Process Control490 To recognize asset from sale of scrap. A memo posting is also make to the specific job record. 2. Scrap communal to various jobs and accounted for at the time of its sale can be accounted for in two ways a. 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 Receivable4,000 Sale of Scrap4,000 To recognize revenue from sale of scrap. b.Regard scrap sales as offsets against manufacturing overhead (the method generally used when the dollar amount of scrap is material) Cash or Accounts Receivable4,000 Manufacturing Department Overhead Control4,000 To record coin raised from sale of scrap. 3. Journal entry to record scrap common to various jobs at the time scrap is returned to storeroom Materials Control4,000 Manufacturing Department Overhead Control4, 000 To record value of scrap returned to storeroom. When the scrap is reused as direct material on a subsequent job, the journal entry is Work-in-Process Control4,000 Materials Control4,000 To record reuse of scrap on a job. Explanations of journal entries are provided here but are not required. 18-30 (30 min. Weighted-average method, spoilage. Solution Exhibit 18-30 calculates the equivalent units of work done to date for each cost category, presents computations of the costs per equivalent unit for each cost category, summarizes total costs to account for, and assigns these costs to units completed (including normal spoilage), to abnormal spoilage, and to units in ending work in process using the weighted-average method. SOLUTION EXHIBIT 18-30 Weighted-Average Method of Process Costing with Spoilage cleaning Department of the Alston Company for May. PANEL A Steps 1 and 2Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) (Step 2) Equivalent Units Physical Units Direct Conversion Flow of Production Materials Costs Work in process, beginning (given) 1,000 Started during current period given) 9,000 To account for 10,000 Good units completed and transferred out during current period 7,400 7,400 7,400 Normal spoilage* 740 ( 100% 740 ( 100% 740 740 740 Abnormal spoilage 260 ( 100% 260 (100% 260 260 260 Work in process, ending (given) 1,600 ( 100% 1,600 ( 25% 1,600 1,600 400 Accounted for Work done to date 10,000 10,000 8,800 *Normal spoilage is 10% of good units transferred out 10% ? ,400 = 740 units. Degree of completion of normal spoilage in this department direct materials, 100% conversion costs, 100%. Total spoilage = 1,000 + 9,000 7,400 1,600 = 1,000 units Abnormal spoilage = 1,000 740 = 260 units. 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, 25%. SOLUTION EXHIBIT 18-30 PANEL B Steps 3, 4, and 5Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process Total Production Direct Conversion Costs Materials Costs (Step 3) Work in process, beginning (given) $ 1,800 $ 1,000 $ 800 Costs added in current period (given) 17,000 9,000 8,000 Costs incurred to date 10,000 8,800 Divided by equivalent units of work done to date (10,000 ( 8,800 Cost per equivalent unit ______ $ 1 $ 1 (Step 4) Total costs to account for $18,800 (Step 5) Assignment of costs Good units completed and transferred out (7,400 units) Costs before adding normal spoilage $14,800 (7,400 ( $1) + (7,400 ( $1) Normal spoilage (740 units) 1,480 (740 ( $1) + (740 ( $1) (A) Total costs of good units completed and transferred out 16,280 (B) Abnormal spoilage (260 units) 520 (260 ( $1) + (260 ( $1) (C) Work in process, endi ng (1,600 units) 2,000 (1,600 ( $1) + (400 ( $1) (A)+(B)+(C) Total costs accounted for $18,800 Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A above. 18-31(25 min. )FIFO method, spoilage.For the Cleaning Department, Solution Exhibit 18-31 calculates the equivalent units of work done in the current period for direct materials and conversion costs, presents the costs per equivalent unit for direct materials and conversion costs, summarizes the total costs for May, and assigns these costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process under the FIFO method. SOLUTION EXHIBIT 18-31 First-in, First-out (FIFO) Method of Process Costing with Spoilage Cleaning Department of the Alston Company for May. PANEL A Steps 1 and 2Summarize 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, beginning (given) 1,000 Started during current period (given) 9,000 To account for 10,000 Good units completed and transferred out during current period From beginning work in process 1,000 1,000 ( (100% (100%) 1,000 ( (100% ( 80%) 0 200 Started and completed 6,400 6,400 ( 100% 6,400 ( 100% 6,400 6,400 Normal spoilage* 740 740 ( 100% 740% ( 100% 740 740 Abnormal spoilage 260 260 ( 100% 260 ( 100% 260 260 Work in process, ending 1,600 1,600 ( 100% 1,600 ( 25% ______ 1,600 400 Accounted for 10,000 _____ _____ Work done in current period only 9,000 8,000 Degree of completion in this department direct materials, 100% conversion costs, 80%. 7,400 physical units completed and transferred out minus 1,000 physical units completed and transferred out from beginning work-in-process inventory. Normal spoilage is 10% of good units transferred out 10% ( 7,400 = 740 units. Degree of comple tion of normal spoilage in this department direct materials, 100% conversion costs, 100%. Total spoilage = 1,000 + 9,000 7,400 1,600 = 1,000 units Abnormal spoilage = 1,000 740 = 260 units. 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, 25%. SOLUTION EXHIBIT 18-31 PANEL B Steps 3, 4, and 5Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process Total Production Direct Conversion Costs Materials Costs (Step 3) Work in process, beginning (given) $ 1,800 $1,000 $ 800 Costs added in current period (given) 17,000 9,000 8,000 Divided by equivalent units of work done in current period (9,000 (8,000 Cost per equivalent unit 1 1 (Step 4) Total costs to account for $18,800 (Step 5) Assignment of costs Good units compl eted and transferred out (7,400 units) Work in process, beginning (1,000 units) $ 1,800 Costs added to beg. work in process in current period 200 (0 ( $1) + (200 ( $1) Total from beginning inventory before normal spoilage 2,000 Started and ompleted before normal spoilage (6,400 units) 12,800 (6,400 ( $1) + (6,400 ( $1) Normal spoilage (740 units) 1,480 (740 ( $1) + (740 ( $1) (A) Total costs of good units completed and transferred out 16,280 (B) Abnormal spoilage (260 units) 520 (260 ( $1) + (260 ( $1) (C) Work in process, ending (1,600 units) 2,000 (1,600 ( $1) + (400 ( $1) (A)+(B)+(C) Total costs accounted for $18,800 Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A. 18-32 (35 min. Weighted-average method, move Department (continuation of 18-30). For the mill Department, Solution Exhibit 18-32 calculates the equivalent units of work done to date for each cost category, presents computations of the costs per equivalent unit for each cost category, summarizes total costs to account for, and assigns these costs to units completed (including normal spoilage), to abnormal spoilage, and to units in ending work in process using the weighted-average method. SOLUTION EXHIBIT 18-32 Weighted-Average Method of Process Costing with Spoilage mill around Department of the Alston Company for May. PANEL A Steps 1 and 2Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) (Step 2) Equivalent Units Physical Units Transferred- Direct Conversion Flow of Production in Costs Materials Costs Work in process, beginning (given) 3,000 Started during current period (given) 7,400 To account for 10,400 Good units completed and transferred out during current period 6,000 6,000 6,000 6,000 Normal spoilage* 300 300 ( 100% 300 ( 100% 300 ( 100% 300 300 300 Abnormal spoilage 100 100 ( 100% 100 (100%, 100 ( 100% 100 100 100 Work in process, ending (given) 4,000 4,0 00 ( 100% 4,000 ( 0% 4,000 ( 25% 4,000 0 1,000 Accounted for 10,400 Work done to date 10,400 6,400 7,400 *Normal spoilage is 5% of good units transferred out 5% ? 6,000 = 300 units. Degree of completion of normal spoilage in this department transferred-in costs, 100% direct materials, 100% conversion costs, 100%. Total spoilage = 3,000 + 7,400 6,000 4,000 = 400 units. Abnormal spoilage = 400 300 = 100 units. Degree of completion of abnormal spoilage in this department transferred-in costs, 100% direct materials, 100% conversion costs, 100%. Degree of completion in this department transferred-in costs, 100% direct materials, 0% conversion costs, 25%. SOLUTION EXHIBIT 18-32PANEL B Steps 3, 4, and 5Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process Total Production Transferred-in Direct Conversion Costs costs Materials Costs (Step 3) Work in process, beginning (given) $ 8,900 $ 6,450 $ 0 $2,450 Costs added in current period (given) 21,870 16,280* 640 4,950 Costs incurred to date 22,730 640 7,400 Divided by equivalent units of work done to date (10,400 ( 6,400 (7,400 Cost per equivalent unit $2. 1856 $ 0. 0 $ 1 (Step 4) Total costs to account for $30,770 (Step 5) Assignment of costs Good units completed and transferred out (6,000 units) Costs before adding normal spoilage $19,713 6,000 ( ($2. 1856 + $0. 10 + $1) Normal spoilage (300 units) 986 300 ( ($2. 1856 + $0. 0 + $1) (A) Total cost of good units completed and transferred out (B) Abnormal spoilage (100 units) 20,699 (C) Work in process, ending (4,000 units) 329 100 ( ($2. 1856 + $0. 10 + $1) (A)+(B)+(C) Total costs accounted for 9,742 (4,000 ( $2. 1856)+(0 ( $0. 10)+(1,000 ( $1) $30,770 *Total costs of good units completed and transferred out in Step 5 Panel B of Solution Exhibit 18-30. Equivalent units of direct materials and conv ersion costs calculated in Step 2 in Panel A above. 18-33(25 min. )FIFO method, Milling Department (continuation of 18-31).Solution Exhibit 18-33 shows the equivalent units of work done in the Milling Department in the current period for transferred-in costs, direct materials, and conversion costs, presents the costs per equivalent unit for transferred-in costs, direct materials, and conversion costs, summarizes the total Milling Department costs for May, and assigns these costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work-in-process under the FIFO method. SOLUTION EXHIBIT 18-33 First-in, First-out (FIFO) Method of Process Costing with Spoilage Milling Department of the Alston Company for May.PANEL A Steps 1 and 2Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 2) (Step 1) Equivalent Units Physical Transferred- Direct Conversion Flow of Production Units in Costs Materials C osts Work in process, beginning (given) 3,000 Started during current period (given) 7,400 To account for 10,400 Good units completed and transferred out during current period From beginning work in process 3,000 3,000 ( (100% ( 100%) 3,000 ( (100% ( 0%) 3,000 ( (100% ( 80%) 0 3,000 600 Started and completed 3,000 3,000 ( 100% 3,000 ( 100% 3,000 ( 100% 3,000 3,000 3,000 Normal spoilage* 300 300 ( 100% 300% ( 100% 300 ( 100% 300 300 300 Abnormal spoilage 100 100 ( 100% 100 ( 100% 100 ( 100% 100 100 100 Work in process, ending 4,000 4,000 ( 100% 4,000 ( 0% 4,000 ( 25% 4,000 0 1,000 Accounted for 10,400 Work done in current period only 7,400 6,400 5,000 Degree of completion in this department transferred-in costs, 100% direct materials, 0% conversion costs, 80%. 6,000 physical units completed and transferred out minus 3,000 physical units completed and transferred out from beginning work-in-process inventory. *Normal spoila ge is 5% of good units transferred out 5% ( 6,000 = 300 units. Degree of completion of normal spoilage in this department transferred-in costs, 100% direct materials, 100% conversion costs, 100%. Total spoilage = 3,000 + 7,400 6,000 4,000 = 400 units. Abnormal spoilage = 400 300 = 100 units. Degree of completion of abnormal spoilage in this department transferred-in costs, 100% direct materials, 100% conversion costs, 100%. Degree of completion in this department transferred-in costs, 100% direct materials, 0% conversion costs, 25%. SOLUTION EXHIBIT 18-33PANEL B Steps 3, 4, and 5Compute Cost per Equivalent Unit, Summarize Total Costs to Account For, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process Total Production Transferred- Direct Conversion Costs in Costs Materials Costs (Step 3) Work in process, begin. given) ($6,450 + $0 + $2,450) $ 8,900 Costs added in current period (given) 21,870 16,280* 640 4,950 Divi ded by equivalent units of work done in current period ( 7,400 ( 6,400 ( 5,000 Cost per equivalent unit $ 2. 20 $ 0. 10 $ 0. 9 (Step 4) Total costs to account for $30,770 (Step 5) Assignment of costs Good units completed and transferred out (6,000 units) Work in process, beginning (3,000 units) $ 8,900 Costs added to beg. work in process in current period 894 (0 ( $2. 20)+(3,000( 0. 10)+( 600 ( $0. 9) Total from beginning inventory before normal spoilage Started and completed before normal spoilage (3,000 units) 9,794 Normal spoilage (300 units) (A) Total costs of good units completed and 9,870 3,000 ( ($2. 20 + $0. 10 + $0. 99) transferred out 987 300 ( ($2. 20 + $0. 10 + $0. 9) (B) Abnormal spoilage (100 units) (C) Work in process, ending (4,000 units) 20,651 (A)+(B)+(C) Total costs accounted for 329 100 ( ($2. 20 + $0. 10 + $0. 99) 9,790 (4,000( $2. 20)+( 0($0. 10)+(1,000($0. 99) $30,770 *Total costs of good units completed and tr ansferred out in Step 5 Panel B of Solution Exhibit 18-31. Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A. 18-34 (20(25 min. ) Job-costing spoilage and scrap. 1. a.Materials Control 600 Manufacturing Department Overhead Control800 Work-in-Process Control1,400 (650 + 500 + 250 = 1,400) b. Accounts Receivable1,250 Work-in-Process Control1,250 2. a. The clause does not specify whether the 1% calculation is to be based on the input cost ($26,951 + $15,076 + $7,538) or the cost of the good output before the 1% normal spoilage is added. b. If the inputs are used to determine the 1% $26,951 + $15,076 + $7,538 = $49,565 1% of $49,565 = $495. 65 or $496, rounded. Then, the entry to leave the $496 normal spoilage cost on the job, remove the salvageable material, and charge manufacturing overhead would be Materials Control 600Manufacturing Department Overhead Control304 Work-in-Process Control 904 ($800 spoilage minus $496 = $304 spoilage cost that is taken out of the job $600 salvage value plus $304 = $904 or $1,400 minus $496 = $904) If the outputs are used to determine the 1% $26,951 $650 = $26,301 15,076 500 =14,576 7,538 250 = 7,288 $49,565$48,165 Then, $48,165 ( 1% = $481. 65 or $482, rounded. The journal entry would be Materials Control 600 Manufacturing Department Overhead Control318 Work-in-Process Control918 18-35(30 min. ) Job costing, rework. 1. Work-in-Process Control (SM-5 motors) ($550 ( 80)44,000 Materials Control ($300 ( 80)24,000 Wages Payable ($60 ( 80)4,800Manufacturing Overhead Allocated ($190 ( 80)15,200 Total costs assigned to 80 spoiled units of SM-5 Motors before considering rework costs. Manufacturing Department Overhead Control (rework)9,000 Materials Control ($60 ( 50)3,000 Wages Payable ($45 ( 50)2,250 Manufacturing Overhead Allocated ($75 ( 50)3,750 Normal rework on 50 units, but not attributable specifically to the SM-5 motor batches or jobs. Loss from Abnormal Rework ($180 ( 30)5,400 Materials Control ($60 ( 30)1,800 Wages Payable ($45 ( 30)1,350 Manufacturing Overhead Allocated ($75 ( 30)2,250 Total costs of abnormal rework on 30 units (Abnormal rework = Actual rework Normal rework = 80 50 = 30 units) of SM-5 Motors. Work-in-Process Control (SM-5 motors)6,000 Work-in-Process Control (RW-8 motors)3,000Manufacturing Department Overhead Allocated (rework)9,000 (Allocating manufacturing department rework costs to SM-5 and RW-8 in the proportion 1,000500 since each motor requires the same number of machine-hours. ) 2. Total rework costs for SM-5 motors in February 2004 are as follows Normal rework costs allocated to SM-5$ 6,000 Abnormal rework costs for SM-5 5,400 Total rework costs$11,400 We emphasize two points a. Only $6,000 of the normal rework costs are allocated to SM-5 even though the normal rework costs of the 50 SM-5 motors reworked tint $9,000. The reason is that the normal rework costs are not specifically attributable to SM-5.For example, the machines happened to malfunction when SM-5 was being made, but the rework was not caused by the specific requirements of SM-5. If it were, then all $9,000 would be charged to SM-5. b. Abnormal rework costs of $5,400 are linked to SM-5 in the management control trunk even though for financial reporting purposes the abnormal rework costs are written off to the income statement. 18-36(30 min. )Job costing, scrap. 1. Materials Control10,000 Manufacturing Overhead Control10,000 (To record scrap common to all jobs at the time it is returned to the storeroom) 2. Cash or Accounts Receivable10,000 Materials Control10,000 (To record sale of scrap from the storeroom) 3. A summary of the manufacturing costs for HM3 and JB4 before considering the value of scrap are as follows HM3 JB4 Total Costs Direct materials $200,000 $150,000 $350,000 Direct manufacturing labor 60,000 40,000 100,000 Manufacturing overhead (200% of direct manufacturing labor) 120,000 80,000 200,000 Total manufacturing costs $380,000 $ 270,000 $650,000 Manufacturing cost per unit $19 $27 ($380,000pic20,000 $270,000pic10,000) The value of scrap of $10,000 generated during March will reduce manufacturing overhead costs by $10,000 from $200,000 to $190,000. Manufacturing overhead will then be allocated at 190% of direct manufacturing labor costs ($190,000 ? $100,000 = 190%) The revised manufacturing cost per unit would then be HM3 JB4 Total Costs Direct materials $200,000 $150,000 $350,000 Direct manufacturing labor 60,000 40,000 100,000 Manufacturing overhead (190% of direct manufacturing labor) 114,000 76,000 190,000 Total manufacturing costs $374,000 $266,000 $640,000 Manufacturing cost per unit $18. 70 $26. 60 ($374,000pic20,000 $266,000pic10,000) 18-37(15(20 min. ) Physical units, inspection at various stages of completion (chapter appendix). Inspection Inspection Inspection at 15% at 40% at 100% Work in process, beginning (20%)* 14,000 14,000 14,000 Started during March 120,000 120,0 00 120,000 To account for 134,000 134,000 134,000 Good units completed and transferred out 113,000a 113,000a 113,000a Normal spoilage 6,600b 7,440c 6,780d Abnormal spoilage (10,000 normal spoilage) 3,400 2,560 3,220 Work in process, ending (70%)* 11,000 11,000 11,000 Accounted for 134,000 134,000 134,000 *Degree of completion for conversion costs of the forging process at the dates of the work-in-process inventories a14,000 beginning inventory +120,000 10,000 spoiled 11,000 ending inventory = 113,000 b6% ( (113,000 14,000 + 11,000) = 6% ( 110,000 = 6,600 c6% ( (113,000 + 11,000 ) = 6% ( 124,000 = 7,440 d6% ( 113,000 = 6,780 18-38(25(35 min. Weighted-average method, inspection at 80% completion (chapter appendix).The computation and allocation of spoilage is the most difficult part of this problem. The units in the ending inventory have passed inspection. Therefore, of the 80,000 units to account for (10,000 beginning + 70,000 started), 10,000 must have been spoiled in June 80,000 (50,000 completed + 20,000 ending inventory). Normal spoilage is 7,000 0. 10 ( (50,000 + 20,000). The 3,000 remainder is abnormal spoilage (10,000 7,000). Solution Exhibit 18-38, Panel A, calculates the equivalent units of work done for each cost category. 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 inspectioninspection occurs when production is 80% complete, while the units in ending WIP are 95% complete. 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. Direct materials are added only later when production is 90% complete. Direct materials units are included for ending work in process, which is 95% complete, but not for beginning work in process, which is 25% complete. The reason is that direct materials are added when produ ction is 90% complete. The ending work in process, therefore, contains direct materials units the beginning work in process does not.