E7-7 Concluded*Total number of equivalent units required in the cost accounted for section determined as follows: Materials Labor Overhead Equivalent units transferred out.... 10,000 9,4
Trang 1CHAPTER 7
DISCUSSION QUESTIONS
7-1
Q7-1 Quality costs may be grouped into the
follow-ing three classifications:
1 Prevention costs are the costs incurred to
prevent product failure They include the
cost of designing high quality products
and production systems, including the
costs of implementing and maintaining
such systems
2 Appraisal costs are the costs incurred to
detect product failure They include the
cost of inspecting and testing materials,
inspecting products during production,
and the cost of obtaining information from
customers about product satisfaction
3 Failure costs are the costs incurred when a
product fails, and may occur internally or
externally Internal failure costs are those
that occur during the manufacturing or
pro-duction process (e.g., scrap, spoilage, and
rework), and external failure costs are
those that occur after the product has
been sold (e.g., warranty repairs and
replacements, sales refunds, handling
customer complaints, and lost sales
resulting from poor product quality)
Q7-2 TQM stands for total quality management,
which is a company-wide approach to quality
improvement in all processes and activities
TQM is a pervasive philosophy of doing
busi-ness that applies to all functional areas of the
company and to all personnel
Q7-3 Five characteristics of TQM systems are:
1 The company’s objective for all business
activity is to serve its customers The term
“product” is extended to include services
as well as goods, and “customer” includes
internal users as well as those outside of
the company who purchase the company’s
products Each employee’s activity is
ori-ented to providing service to the customer
2 Top management provides an active
leadership role in the quality improvement
movement
3 All employees are actively involved in
quality improvement Employees are not
only asked to contribute ideas, but also to
find better ways of doing things.Involvement can be successful only whenthere is encouragement and an open andhonest environment of trust
4 The company has a system of identifyingquality problems, developing solutions,and setting quality improvement objec-tives This typically involves organizingemployees from all ranks and from differ-ent organizational units along with man-agers who have authority to take thenecessary action to solve problems
5 The company places a high value on itsemployees and provides continuous train-ing, as well as recognition for achieve-ment Employees perform best when theyare well trained, and they have the great-est capacity to contribute when they arehighly educated
Q7-4 The concept of continuous quality improvementdiffers from the concept of quality optimization
in that continuous quality improvement is adynamic process of change under the assump-tion that the ideal is not an absolute knownvalue; whereas quality optimization is a staticapproach to finding the best solution to agiven set of fixed and known constraints.Q7-5 The first problem with trying to inspect qualityinto the product is that it detects internal fail-ures only after considerable cost has beenincurred The second problem is that the mag-nitude of the cost of the internal failures,detected by inspection, is rarely measuredand typically ignored
Q7-6 Companies should concentrate their efforts
on preventing poor quality rather than on ing to inspect it into the process, because itwill result in less total quality cost Theapproach is founded on the belief that byincreasing prevention costs, the cost of inter-nal failures—such as scrap, spoilage, rework,and downtime—will decline by a largeramount than the increase in prevention costs.Q7-7 Quality costs should be measured andreported to management in order to provideincentive and direction for improving quality
Trang 2try-Large quality costs indicate large
opportuni-ties for improvement Also, measurements
provide a basis for monitoring the cost of
quality and evaluating improvements
Q7-8 Scrap includes (1) the filings and trimmings
remaining after processing materials, (2)
defective materials that cannot be used or
returned to the vendor, and (3) broken parts
resulting from employee errors or machine
failures Spoiled goods differ from scrap in
that they are partially or fully completed units
that are in some way defective and are not
economically or physically correctable
Spoiled goods may be units of the product or
component parts, and they may or may not
have a salvage value Rework is the process
of correcting defective manufactured goods
Q7-9 The cost of scrap, spoilage, and rework
should not be ignored, because such costs
are often quite high and often result frominternal failures that can be eliminated.Ignoring the cost of these internal failuressends a signal to managers that such costsare acceptable Reporting such costs pro-vides incentive for improvement, particularly ifthe costs are large
Q7-10 In order to know what to do with the cost, the
accountant must know whether the spoilage orrework is caused by the customer or by aninternal failure If spoilage or rework is theresult of a customer requirement, the unrecov-erable cost should be charged to the job Onthe other hand, if the spoilage or rework is theconsequence of an internal failure, the unre-coverable cost should be removed from the job(i.e., charged to Factory Overhead Control)and reported to responsible management
Trang 3E7-2 Spoiled Goods Inventory 120
Factory Overhead Control 112
Work in Process 232
E7-3 $27,000 total job cost/1,000 chairs = $27 cost per chair
Spoiled Goods Inventory ($10 × 100 chairs) 1,000
Factory Overhead Control (($27 – $10) × 100) 1,700
Finished Goods Inventory ($27 × 900 chairs) 24,300
Work in Process 27,000
E7-4 Spoiled goods inventory ($100 × 100 units) 10,000
Cost of Goods Sold 94,000
Work in Process 104,000
E7-5 Factory Overhead Control 700
Materials (100 units × $1.50) 150 Payroll (100 units × 1/4 hour × $10 per hour) 250 Applied Factory Overhead
(100 × 1/4 hr × $12 rate) 300 Finished Goods Inventory 6,600
Work in Process 6,600
Trang 4E7-6 Work in Process 8,500
Materials (1,000 units × $1) 1,000 Payroll (1,000 units × 1/6 hour × $15) 2,500 Applied Factory Overhead (1,000 × 1/6 × $30) 5,000 Cost of Goods Sold 73,500
Work in Process ($65,000 + $8,500) 73,500 Accounts Receivable ($73,500 × 150%) 110,250
Sales 110,250
Trang 5Forming Department Cost of Production Report
Materials $ 1,260
Labor 770
Factory overhead 1,400
Total cost in beginning inventory $ 3,430
Cost added during current period:
Materials $36,240 10,000 $3.75 Labor 10,510 9,400 1.20 Factory overhead 21,725 9,250 2.50 Total cost added during current period $68,475
Total cost charged to department $71,905 $7.45
Charge to Factory Overhead for spoilage:
Materials 500 100% $3.75 $1,875
Labor 500 100% 1.20 600
Factory overhead 500 100% 2.50 1,250 3,725 Work in Process, ending inventory:
Trang 6E7-7 (Concluded)
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials Labor Overhead Equivalent units transferred out 8,000 8,000 8,000
Equivalent units in ending inventory 1,500 900 750
Equivalent units of spoilage 500 500 500
Total equivalent units 10,000 9,400 9,250
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2) Work in Process—Finishing Department 59,600
Factory Overhead Control 3,725
Trang 7Finishing Department Cost of Production Report
Cost from preceding department $ 5,500
Materials 1,950
Labor 1,180
Factory overhead 1,770
Total cost in beginning inventory $ 10,400
Cost added during current period:
Cost from preceding department $ 54,500 5,000 $12.00 Materials 20,650 4,520 5.00 Labor 16,260 4,360 4.00 Factory overhead 24,390 4,360 6.00 Total cost added during current period $115,800
Total cost charged to department $126,200 $27.00
Transferred to Finished Goods 3,800 100% $27.00 $102,600 Transferred to Spoiled Goods inventory
at salvage value 400 $10.00 4,000 Charge to Factory Overhead for spoilage:
Cost of completed spoiled units 400 100% $27.00 $10,800
Work in Process, ending inventory:
Cost from preceding department 800 100% $12.00 $ 9,600
Trang 8E7-8 (Concluded)
*Total number of equivalent units required in the cost accounted for section determined as follows:
Prior Dept Cost Materials Labor Overhead Equivalent units transferred out 3,800 3,800 3,800 3,800
Equivalent units of spoilage 400 400 400 400
Total equivalent units 5,000 4,520 4,360 4,360
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2) Finished Goods Inventory 102,600
Spoiled Goods Inventory 4,000
Factory Overhead Control 6,800
Work in Process—Finishing Department 113,400
Trang 9Cracking Department Cost of Production Report
Materials $ 1,900
Conversion cost 240
Total cost in beginning inventory $ 2,140
Cost added during current period:
Materials $20,100 55,000 $.40 Conversion cost 5,080 53,200 10 Total cost added during current period $25,180
Total cost charged to department $27,320 $ 50
Work in Process, ending inventory:
Materials 6,000 100% 40 $2,400
Conversion cost 6,000 70% 10 420 2,820
*Total number of equivalent units required in the cost accounted for section determined as follows:
Materials Conversion Cost Equivalent units transferred out 49,000 49,000
Equivalent units in ending inventory 6,000 4,200
Total equivalent units 55,000 53,200
** Total cost (i.e., the cost in beginning inventory plus the cost added during the current period)
divided by the total number of equivalent units required in the cost accounted for section
(2) Work in Process—Refining Department 24,500
Work in Process—Cracking Department 24,500
Trang 10E7-10 APPENDIX
Tooling Department Cost of Production Report
Materials $ 1,600
Labor 290
Factory overhead 950
Total cost in beginning inventory $ 2,840
Cost added during current period:
Materials $ 9,750 13,000 $.75 Labor 2,380 11,900 20 Factory overhead 9,200 11,500 80 Total cost added during current period $21,330
Total cost charged to department $24,170 $1.75
Transferred to Finishing Department:
Cost to complete this period:
Materials 2,000 0% $ 75 0
Labor 2,000 30% 20 120
Factory overhead 2,000 40% 80 640 $ 3,600
Total cost transferred to
Trang 11E7-10 APPENDIX (Concluded)
* Number of equivalent units of cost added during the current period determined as follows:
Materials Labor Overhead
To complete beginning inventory 0 600 800
Started and completed this period 5,000 5,000 5,000
Ending inventory 3,000 1,800 1,200
Spoiled units 5,000 4,500 4,500
Total equivalent units 13,000 11,900 11,500
** Cost added during the current period divided by the number of equivalent units of cost added ing the current period
dur-(2) Work in Process—Finishing Department 12,350
Factory Overhead Control 8,250
Work in Process—Tooling Department 20,600
Trang 12E7-11 APPENDIX
Finishing Department Cost of Production Report For September
Cost from preceding department $ 14,160
Materials 1,210
Labor 1,300
Factory overhead 3,250
Total cost in beginning inventory $ 19,920
Cost added during current period:
Cost from preceding department $ 72,000 6,000 $12.00 Materials 6,240 6,240 1.00 Labor 12,240 6,120 2.00 Factory overhead 30,600 6,120 5.00 Total cost added during current period $121,080
Total cost charged to department $141,000 $20.00
Trang 13E7-11 APPENDIX (Concluded)
Transferred to Finished Goods:
Cost to complete this period:
Materials 1,200 20% $ 1.00 240
Labor 1,200 60% 2.00 1,440
Factory overhead 1,200 60% 5.00 3,600 $ 25,200
Total cost transferred to
Transferred to Spoiled Goods inventory
at salvage value 700 $12.00 8,400 Charge to Factory Overhead for spoilage:
Cost of completed spoiled units 700 100% $20.00 $14,000
Work in Process, ending inventory:
Cost from preceding department 1,500 100% $12.00 $18,000
Materials 1,500 100% 1.00 1,500
Labor 1,500 60% 2.00 1,800
Factory overhead 1,500 60% 5.00 4,500 25,800
*Number of equivalent units of cost added during the current period determined as follows:
Prior Dept.
Started and completed this period 3,800 3,800 3,800 3,800
Ending inventory 1,500 1,500 900 900
Spoiled units 700 700 700 700
Total equivalent units 6,000 6,240 6,120 6,120
** Cost added during the current period divided by the number of equivalent units of cost added ing the current period
dur-(2) Finished Goods Inventory 101,200
Spoiled Goods Inventory 8,400
Factory Overhead Control 5,600
Work in Process—Finishing Department 115,200
Trang 14E7-12 APPENDIX
Cooking Department Cost of Production Report
Cost from preceding department $ 2,920
Materials 305
Labor 140
Factory overhead 210
Total cost in beginning inventory $ 3,575
Cost added during current period:
Cost from preceding department $10,850 35,000 $.31 Materials 1,500 37,500 04 Labor 2,430 40,500 06 Factory overhead 3,645 40,500 09 Total cost added during current period $18,425
Total cost charged to department $22,000 $.50
Transferred to Bottling Department:
Cost to complete this period:
Materials 10,000 25% $.04 100
Labor 10,000 75% 06 450
Factory overhead 10,000 75% 09 675 $ 4,800
Total cost transferred to
Work in Process, ending inventory:
Cost from preceding department 8,000 100% $.31 $2,480
Trang 15E7-12 APPENDIX (Concluded)
*Number of equivalent units of cost added during the current period determined as follows:
Prior Dept Cost Materials Labor Overhead
Started and completed this period 27,000 27,000 27,000 27,000
Ending inventory 8,000 8,000 6,000 6,000
Total equivalent units 35,000 37,500 40,500 40,500
** Cost added during the current period divided by the number of equivalent units of cost added ing the current period
dur-(2) Work in Process—Bottling Department 18,300
Work in Process—Cooking Department 18,300
Trang 16P7-1
(1) Spoiled Goods Inventory (200 units × $1.75) 350
Factory Overhead Control 1,450
Work in Process 1,800 (2) Accounts Receivable ($550 + $350) 900
Scrap Sales 550 Spoiled Goods Inventory 350 P7-2
$90,000 total job cost
(1) 5,000 units on job = $18 per unit
Spoiled Goods Inventory (200 units × $15 salvage) 3,000
Factory Overhead Control 600
Work in Process (200 units × $18 cost) 3,600 Cost of Goods Sold 86,400
Work in Process ($90,000 – $3,600) 86,400 Accounts Receivable ($86,400 × 140%) 120,960
Sales 120,960 (2) Spoiled Goods Inventory (200 units × $15 salvage) 3,000
Work in Process 3,000 Cost of Goods Sold 87,000
Work in Process ($90,000 – $3,000) 87,000 Accounts Receivable ($87,000 × 140%) 121,800
Sales 121,800