Week 3&4 Spoilage, Rework, and Scrap

Question 1

Spoilage

Answer 1

spoilage refers to output that fails to attain either a specified performance level or standard for composition

Question 2

Rework

Answer 2

rework is the conversion of production rejects into reusable products of the same or lower quality

Question 3

Scrap

Answer 3

Scrap is a residual material that results from manufacturing a product.

Question 4

Waste or refuse

Answer 4

A type of scrap; the firm may have to pay to have the scrap removed

Question 5

Normal Spoilage

Answer 5

Normal spoilage arises under efficient operating conditions as a result of predictable rates of failure in a production process

Question 6

Abnormal Spoilage

Answer 6

Abnormal spoilage is spoilage that is unexpected under efficient operating conditions but is regarded as controllable and avoidable.

Question 7

How is the Loss from Abnormal Spoilage presented?

Answer 7

The Loss from Abnormal Spoilage is presented in a detailed statement of comprehensive income. It should not be a line item of COGM

Question 8

What is the Net Disposal Value of Spoilage

Answer 8

Spoilage has zero net disposal value

Question 9

Inspection Point

Answer 9

An inspection point is the stage of the production process at which products are examined to determine whether they are acceptable or unacceptable units.

Question 10

5 Step procedure for process costing with spoilage

Answer 10

1. Summarize the flow of physical units of output
2. Compute the output in terms of equivalent units.
3. Summarize the total costs to account for.
4. Compute the cost per equivalent unit
5. Assign costs to the units completed, spoiled units, and units in ending work-in-process inventory

Question 11

Total Spoilage (Formula)

Answer 11

(Units in beg. wip inv. + Units started) - (Good units completed and transferred out + Units in ending wip inventory)

Question 12

Abnormal Spoilage

Answer 12

Total spoilage - Normal Spoilage

Question 13

Write out the format of a production-cost worksheet (2 Panels)

Answer 13

p.773

Question 14

How is FIFO different from the standard-costing method and the weighted-average method?

Answer 14

Cost of beginning WIP is separate and distinct from the costs of the work done in the current period. All spoilage costs are assumed to be related to the units completed during the period

Question 15

Net cost of the spoilage of units

Answer 15

Disposal value - spoiled good value

Question 16

When are Direct Materials and Conversion Costs added during the production process?

Answer 16

DM: Beginning
FIFO: DM = 0% bc of this

Conversion Costs: evenly throughout process