When the cost of good units are increased and lost units are not included in an equivalent unit schedule, these units are considered a.. prorating the spoilage cost between units transf
Trang 12 Economically reworked units may
a not be sold through normal channels of distribution
b be sold through normal channels of distribution
c not be reprocessed to a sufficient quality level
d also be called a spoiled unit
4 Spoiled units are
a units that cannot be economically reworked to bring them up to standard
b units that can be economically reworked to bring them up to standard
c the same as defective units
d considered abnormal losses
7–1
Trang 25 The cost of abnormal losses (net of disposal costs) should be written off as
Product cost Period cost
6 Which of the following would fall within the range of tolerance for a production cycle?
Abnormal loss Normal loss
7 If abnormal spoilage occurs in a job order costing system, has a material dollar value,
and is related to a specific job, the recovery value of the spoiled goods should be
a a scrap inventory account the specific job in process
b the specific job in process overhead
c a loss account the specific job in process
8 If normal spoilage is detected at an inspection point within the process (rather than at
the end), the cost of that spoilage should be
a included with the cost of the units sold during the period
b included with the cost of the units completed in that department during the
Trang 39 A continuous loss
a occurs unevenly throughout a process
b never occurs during the production process
c always occurs at the same place in a production process
d occurs evenly throughout the production process
10 Which of the following would be considered a discrete loss in a production process?
a adding the correct ingredients to make a bottle of ketchup
b putting the appropriate components together for a stereo
c adding the wrong components when assembling a stereo
d putting the appropriate pieces for a bike in the box
11 The method of neglect handles spoilage that is
a discrete and abnormal
b discrete and normal
c continuous and abnormal
d continuous and normal
12 Normal spoilage is defined as unacceptable production that
a arises because of a special job or process
b occurs in on-going operations
c is caused specifically by human error
d is in excess of that which is expected
13 When the cost of good units are increased and lost units are not included in an
equivalent unit schedule, these units are considered
a normal and discrete
b normal and continuous
c abnormal and discrete
d abnormal and continuous
Trang 414 The net cost of normal spoilage in a job order costing system in which spoilage is
common to all jobs should be
a assigned directly to the jobs that caused the spoilage
b charged to manufacturing overhead during the period of the spoilage
c charged to a loss account during the period of the spoilage
d allocated only to jobs that are completed during the period
15 Normal spoilage is
a written off as a period cost
b never shown in EUP schedules
c treated as a product cost
d both b and c
16 Normal spoilage units resulting from a continuous process
a are extended to the EUP schedule
b result in a higher unit cost for the good units produced
c result in a loss being incurred
d cause estimated overhead to increase
17 When normal spoilage is discovered at a discrete inspection point and the degree of
completion of ending work in process has not reached the level of completion of the inspection point, normal spoilage is handled by
a prorating the spoilage cost between units transferred out and units in ending
work in process
b extending the spoiled units to the EUP schedule
c assigning the normal spoilage costs to the units transferred out and those in
beginning inventory
d both b and c
Trang 518 In a job order costing system, the net cost of normal spoilage is equal to
a estimated disposal value plus the cost of spoiled work
b the cost of spoiled work minus estimated spoilage cost
c the units of spoiled work times the predetermined overhead rate
d the cost of spoiled work minus the estimated disposal value
19 Taylor Co has a production process in which the inspection point is at 65 percent of
conversion The beginning inventory for July was 35 percent complete and ending inventory was 80 percent complete Normal spoilage costs would be assigned to which
of the following groups of units, using FIFO costing?
Beginning Ending Units StartedInventory Inventory & Completed
20 The cost of normal discrete losses is
a absorbed by all units past the inspection point on an equivalent unit basis
b absorbed by all units in ending inventory
c considered a period cost
d written off as a loss on an equivalent unit basis
21 When spoilage is discovered at a discrete point in the production process,
a equivalent units for the spoilage are shown in the EUP schedule
b its cost, if normal, should be assigned to the units transferred out
c its cost, if abnormal, should be assigned to the good units produced
d both a and c
Trang 622 When the cost of lost units must be assigned, and those same units must be included in
an equivalent unit schedule, these units are considered
a normal and discrete
b normal and continuous
c abnormal and discrete
d abnormal and continuous
23 Abnormal spoilage is
a spoilage that is forecasted or planned
b spoilage that is in excess of planned
c accounted for as a product cost
d debited to Cost of Goods Sold
24 Which of the following accounts is credited when abnormal spoilage is written off in an
actual cost system?
25 Which of the following types of spoilage cost is considered a product cost?
Abnormal spoilage Normal spoilage
Trang 726 Abnormal spoilage can be
27 The cost of abnormal discrete units must be assigned to
good units lost units
28 The cost of abnormal continuous losses is
a considered a product cost
b absorbed by all units in ending inventory and transferred out on an equivalent
unit basis
c written off as a loss on an equivalent unit basis
d absorbed by all units past the inspection point
29 Which of the following statements is false? The cost of rework on defective units, if
a abnormal, should be assigned to a loss account
b normal and if actual costs are used, should be assigned to material, labor and
overhead costs of the good production
c normal and if standard costs are used, should be considered when developing the
overhead application rate
d abnormal, should be prorated among WIP, FG, and CGS
Trang 830 A process that generates continuous defective units
a never requires a quality control point
b requires a quality control point at the end of the process
c requires quality control points every time new materials are added to the
32 When material added in a successor department increases the number of units, the
a extra units are treated like spoilage
b unit cost of the transferred-in units is decreased
c costs associated with the extra units are maintained separately for financial
a What happens to the spoiled units?
b What is the actual cost of spoilage?
c How can spoilage be controlled?
d Why does spoilage happen?
Trang 934 In regard to spoilage, management should be most concerned with which of the
Use the following information for questions 35–46
The following information is available for K Co for June:
Beginning WIP
Normal spoilage (discrete) 1,100 units
Ending WIP
Beginning Work in Process Costs:
Trang 1036 What are equivalent units of production for conversion costs using FIFO?
Trang 1141 What is cost per equivalent unit for material using weighted average?
a $6,193 allocated between WIP and Transferred Out
b $6,424 assigned to units Transferred Out
c $6,193 assigned to loss account
d $6,424 assigned to units Transferred Out
Trang 1246 What is the total cost assigned to goods transferred out using weighted average?
Use the following for questions 47–57
The following information is available for OP Co for the current year:
Beginning Work in Process Costs of Beginning Work in Process:
Normal spoilage (continuous) 5,000 units
Transferred out 66,000 units
All materials are added at the start of production
47 Using weighted average, what are equivalent units for material?
Trang 1349 What is the cost per equivalent unit for material using weighted average?
52 Assume that the cost per EUP for material and conversion are $1.75 and $4.55,
respectively What is the cost assigned to ending Work in Process?
Trang 1454 Using FIFO, what are equivalent units for conversion costs?
57 Assume that the FIFO EUP cost for material and conversion are $1.50 and $4.75,
respectively Using FIFO what is the total cost assigned to the units transferred out?
Trang 15Use the following information for questions 58–65.
T Co has the following information for July:
Beginning Work in Process: (35% complete) 20,000 units
Ending Work in Process: (70% complete) 14,500 units
Beginning Work in Process Costs:
All materials are added at the start of the production process T Co inspects goods at 75
percent completion as to conversion
58 What are equivalent units of production for material, assuming FIFO?
60 Assume that the costs per EUP for material and conversion are $1.00 and $1.50,
respectively What is the amount of the period cost for July using FIFO?
Trang 1661 Assume that the costs per EUP for material and conversion are $1.00 and $1.50,
respectively Using FIFO, what is the total cost assigned to the transferred-out units (rounded to the nearest dollar)?
64 Assume that the costs per EUP for material and conversion are $1.00 and $1.50,
respectively What is the cost assigned to normal spoilage, using weighted average, and where is it assigned?
a $7,437.50 Units transferred out and EI
b $7,437.50 Units transferred out
c $8,750.00 Units transferred out and EI
d $8,750.00 Units transferred out
Trang 1765 Assume that the costs per EUP for material and conversion are $1.00 and $1.50,
respectively Assuming that weighted average is used, what is the cost assigned to ending inventory?
a its minimum tolerance for defects
b its maximum tolerance for defects
c a decision to seek world-class status as a manufacturer
d its automated quality limits
67 World-class companies
a believe that “Six-Sigma” is the best AQL to have
b have performed well if their defect percentage is greater than their AQL
c continuously attempt to raise their AQL
d all of the above
68 Six Sigma translates into a rate of 3.4 defects per
a million items processed
b billion items processed
c thousand items processed
d hundred items processed
Trang 1869 The concept of Six Sigma is directly related to
Variation elimination JIT Inventory
70 Performing services with zero errors is viewed as a(an)
a reasonable goal for all service organizations
b impossible goal for any service organization
c laudable goal for most service organizations
d goal equivalent to achieving Six-Sigma performance
1 How is the cost of reworking defective items accounted for?
ANSWER: Reworked units are also known as defective units These units can be reprocessed and sold or sold as is as irregulars Rework cost is classified as either a product or period cost If rework is considered normal and actual costing is used, the cost is added to current Work in Process and is assigned to all units produced If rework
is abnormal, the cost is allocated to a loss account for the period
MEDIUM
Trang 192 Discuss the accounting treatment of spoilage in a job order costing system.
ANSWER: If the spoilage is common to all jobs, is normal, and can be estimated, thenet cost is applied to production using a predetermined overhead rate that was set by including the spoilage estimate in estimated overhead If spoilage pertains to a particularjob and is normal, the disposal value of the spoiled goods should be removed from that particular job If the spoilage is abnormal, the net cost should be charged to a loss account and credited to the particular Work in Process job that created the spoilage.MEDIUM
3 Discuss why units are lost during production
ANSWER: In most production processes, losses are anticipated to a certain degree Losses may be classified as normal and abnormal depending on management’s
expectations A normal loss is one that is expected, while an abnormal loss is one that exceeds the normal loss The losses may result in spoiled or defective units Spoiled units cannot be economically reworked; defective units can be Losses can occur on a continuous or a discrete basis Quality control points are established at the end of and/orwithin the process to inspect goods and remove from further processing those units that are either spoiled or defective
MEDIUM
4 Discuss how spoilage is treated in EUP computations
ANSWER: If spoilage is normal and continuous, the calculations for EUP do not include this spoilage (method of neglect), and the good units simply absorb the cost of such spoilage If spoilage is normal and discrete, the equivalent units are used in the EUP calculations, and the spoilage cost is assigned to all units that passed through the inspection point during the current period If the spoilage is abnormal and either discrete
or continuous, the equivalent units are used in EUP calculations and costed at the cost per EUP; the total cost is then assigned to a loss account
MEDIUM
Trang 20Use this data for questions 5 and 6.
The following information is available for Paas Co for January 2001 All materials are added atthe start of production
Beginning Work in Process: (80% complete) 8,000 units
Ending Work in Process: (55% complete) 15,000 units
Beginning Work in Process Costs:
Trang 215 Prepare a cost of production report for January using FIFO.
ANSWER: BI 8,000 + Started 35,000 = Accountable for 43,000
Paas Co
Cost ReportJanuary 31, 2001
Cost Transferred Out
$284,000 – 86,355 – 22,650 = 174,995Total costs accounted for $ 284,000
MEDIUM
Trang 226 Prepare the cost of production report assuming weighted average.
ANSWER: BI 8,000 + Started 35,000 = Accountable for 43,000
Paas CompanyCost ReportJanuary 31, 2001
Trang 237 MJ Company manufactures picture frames of all sizes and shapes and uses a job order
costing system There is always some spoilage in each production run The following costs relate to the current run:
Estimated overhead (exclusive of spoilage) $160,000
a Labor hours are used to determine the predetermined overhead rate What is the
predetermined overhead rate per direct labor hour?
b Prepare the journal entry needed to record the spoilage
c Prepare the journal entry if the spoilage relates only to Job #12 rather than being
a part of all production runs
MEDIUM
Trang 248 I Eat Yogurt Company produces yogurt in two departments—Mixing and Finishing In
Mixing, all ingredients except fruit are added at the start of production In Finishing, fruit is added and then the mixture is placed into containers Adding the fruit to the basic yogurt mixture increases the volume transferred in by the number of gallons of fruit added Any spoilage that occurs is in the Finishing Department Spoilage is detected just before the yogurt is placed into containers or at the 98 percent
completion point All spoilage is abnormal
Finishing Department
BWIP (100% fruit, 0% container, 30% CC) 5,000 gallons
EWIP (100% fruit, 0% container, 60% CC) 1,700 gallons