Question :
81)
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82)
A company manufactures draperies. Because of strict production specifications, the : 1196134
81)
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A company manufactures draperies. Because of strict production specifications, the manufacturing department often has spoiled items. If the spoiled items are under 10 percent of a job’s total items they are treated as normal spoilage. During February 20×1 job #101 for 200 draperies had 16 spoiled items. The spoiled items were detected immediately before they were packaged. They had already passed the safety inspection. The marketing manager believes the items can be sold for $280 each. They had a cost at point of detection of $600 each. These costs included $300 for direct manufacturing labour, $200 for direct materials, and $100 for factory overhead.
Required:
a.Make the necessary journal entry, or entries, to record the spoiled units if the spoilage is normal and assigned to an overhead control account.
b.Make the necessary journal entry, or entries, to record the spoiled units if the spoilage is assigned to job #101. 82)
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83)
Carriage Florists operate a flower shop. Because most of their orders are via telephone or FAX, numerous orders have to be reworked. The average cost of the reworked orders is $4: $2.50 for labour, $1 for more flowers, and $0.50 for overhead. This ratio of costs holds for the average original order. On a recent day the shop reworked 32 orders out of 166. The original cost of the 32 orders totalled $480. The average cost of all orders is $12.50, including rework, with an average selling price of $20.
Required:
Prepare the necessary journal entry, or entries, to record the rework for the day if the shop charges such activities to Arrangement Department Overhead Control. Prepare a journal entry to transfer the finished goods to Finished Goods Inventory. 83)
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84)
Dad’s Bottling Company often has bottles that do not meet customer specifications although it does not allow for spoilage. Some of the rejects are immediately crushed and recycled while others are held for future use in other jobs. During May the company had bottles costing $1,000 that were recycled and $1,600 worth of bottles that were placed in inventory for later use. These bottles were sold in June for $2,000.
Required:
Record the journal entries associated with the above activities. Assume saleable scrap items are returned to inventory when rejected during inspection. 84)
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85)
Springfield Sign Shop manufactures only specific orders. It uses a standard cost system. During one large
order for the transit authority, an unusual number of signs were spoiled. The normal spoilage rate is 10%
of units started. The point of first inspection is half way through the process, the second is three-fourths
through the process, and the final inspection is at the end of the process. Other information about the job
is as follows:
Signs started3,000
Signs spoiled450
Direct materials put into process at beginning $
60,000
Conversion costs for job$120,000
Standard direct material costs per sign$27
Standard conversion cost per sign$54
Average point of spoilage is the 3/4 completion point
Average current disposal cost per spoiled sign$15
Required:
Make necessary journal entries to record all spoilage.
85)
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86)
King City Sign Shop manufactures only specific orders. It uses a standard cost system. During one large order for the airport authority, an unusual number of signs were spoiled. The normal spoilage rate is 10 percent of units started. The point of first inspection is one-third through the process, the second is two-thirds through the process and the final inspection is at the end of the process. Other information about the job is as follows:
Signs started2,000
Signs spoiled300
Direct materials put into process at beginning$40,000
Conversion costs for job$80,000
Standard direct material costs per sign$18
Standard conversion cost per sign$36
Average point of spoilage is the 2/3 completion point
Average sales revenue per spoiled sign$10
Required:
Make necessary journal entries to record all spoilage. 86)
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ESSAY.
Write your answer in the space provided or on a separate sheet of paper. 87)
Busy Hands Craft Company is a small manufacturing company that specialized in arts and crafts items. It recently bought an old textile mill that it has refurbished to manufacture and dye special cloth to be sold in its craft shops. However, it discovered something new for its accounting system. The company had never before had finished goods that did not meet standard, leftover materials from processing runs, or unacceptable outputs.
Required:
As the business consultant for the company, explain how it can handle the items mentioned. Include any potential problems with the accounting procedures.
88)
Explain the meaning of the terms spoilage, scrap, and rework. Provide an example of each. Is it possible
for a single firm to have all three from a single productive process?
89)
You are the chief financial officer of a lumber mill, and you are becoming quite concerned about the
spoilage, scrap, and reworked items associated with your production processes. Your firm produces
mainly products for the building industry.
Required:
Discuss the problems associated with these items and the methods your company can use to reduce
spoilage, scrap, and reworked items.
90)
Harriette has been reviewing the accounting system for her company and is very concerned about the accounting for spoilage. It appears that spoilage is accounted for only at the end of the processing cycle. While this concept is acceptable in general, Harriette believes that a better method can be found to properly account for the spoilage when it occurs. She believes that there must be something better than the weighted-average method of accounting for spoilage. She would like the company to use a method that provides closer tracking of the spoilage with the accounting for the spoilage.
Required:
Discuss the problems Harriette is having with the accounting system.
91)
Shazam Machines produces numerous types of money change machines. All machines are made in the same production department and many use exactly the same processes. Because customers have such different demands for the machine characteristics, the company uses a job costing system. Unfortunately, some of the production managers have been upset for the last few months when their jobs were charged with the spoilage that occurred over an entire processing run of several types of machines. Some of the best managers have even threatened to quit unless the accounting system is changed.
Required:
What recommendations can you suggest to improve the accounting for spoilage?
92)
When a unit has to be reworked, the rework may be classified in three ways. What are those ways, and
how does the accounting for each differ?
