Question : 48) Harriet has been reviewing the accounting system for her : 1211902

 

48) Harriet has been reviewing the accounting system for her company and she 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, Harriet 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 Harriet is having with the accounting system.

Objective 18.4

 

1) When spoiled goods have a disposal value, the net cost of the spoilage is computed by ________.

A) deducting disposal value from the costs of the spoiled goods accumulated to the inspection point

B) adding the costs to complete a saleable product to the costs accumulated to the inspection point

C) deducting the costs to complete a saleable product from the costs accumulated to the inspection point

D) adding disposal value to the costs of the good units transferred

 

2) The costs of normal spoilage are allocated to the units in ending work-in-process inventory, in addition to completed units if the units ________.

A) in ending inventory have not passed the inspection point

B) in ending work-in-process inventory have passed the inspection point

C) in ending work in process inventory are more than 25% complete

D) in ending work-in-process inventory are less than 25% complete

 

3) Normal spoilage is computed on the basis of the number of ________.

A) good units that pass inspection during the current period

B) units that pass the inspection point during the current period

C) units that are in ending work in process

D) units that started during the particular period

 

4) Which of the following correctly reflects what units passed inspection this period? Assume beginning work in process was completed and ending work in process was started during the period.

 

Inspection Point at Completion Level

10%50%100%

A) Beginning work in process (30% complete)NoNoYes

B) Started and completedNoYesYes

C) Ending work in process (40% complete)YesNoYes

D) Beginning work in process (5% complete)YesYesYes

5) Early inspections can ________.

A) prevent any further conversion costs being wasted on units that are already good

B) increase conversion costs on units that are already spoiled

C) increase any further costs being spent on units that are already spoiled

D) prevent any further costs being wasted on units that are already spoiled

 

6) Cost of spoiled units equals ________.

A) all costs incurred in producing them up to the point of delivery

B) all costs incurred in producing them up to the point of inspection

C) all costs incurred in producing them up to the point of selling

D) all costs incurred in producing them up to the point of packaging

 

 

 

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