Video - Spoilage, Cost, and Inventory

Question 1

Two types of spoilage and scrap

Answer 1

normal and abnormal

Question 2

Normal spoilage

Answer 2

uncontrollable and unavoidable as part of the current mfg process

included in COGS

cost is spread equally across all jobs

Question 3

Abnormal spoilage

Answer 3

controllable and avoidable

considered a period cost and is not included as a part of COGS

Question 4

Scrap

Answer 4

excess material after production

• sale of scrap can reduce OH, or
• if significant can be “other sales”

Question 5

Process costing

Answer 5

normal spoilage spread over the good units produced

abnormal spoilage is removed from the costing system and treated as a period cost.

Question 6

Manufactured goods - inventory components

Answer 6

raw materials
work in process
finished goods

Question 7

Schedule of Cost of Goods Manufactured and Cost of Goods Sold - 4 sections

Answer 7

For manufacturers there are 4 sections

1 direct materials
2 total mfg costs
3 cost of goods mfg
4 cost of goods sold

Question 8

Direct Materials Flow

Answer 8

BI Direct Materials
\+ DM Purchased
= DM Available
-  Ending Direct Materials
=  Direct Materials Used

Question 9

Total Manufacturing Costs

Answer 9

Direct Materials Used
+ Direct Labor
+ Overhead
= Total Manufacturing Costs

Question 10

Cost of Goods Mfg

Answer 10

BI WIP
\+ Total Mfg Costs
= WIP Available
-  EI
= Cost of Goods Manufactured

Question 11

Cost of Goods Sold

Answer 11

BI FG
\+  Cost of Goods Manufactured
=  Goods Available for Sale
-  EI FG
= COGS