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CHAPTER 18: SPOILAGE, REWORKED UNITS, AND SCRAP TRUE/FALSE 1. Reducing defects helps to reduce costs, but does not make the business more competitive. Answer : False Difficulty : 2 Objective : 1 Reducing defects does make the business more competitive. 2. Reworked goods are unacceptable units of production usually not capable of being repaired or converted into a salable product. Answer : False Difficulty : 2 Objective : 1 Reworked goods are unacceptable units of production that can be repaired into a salable product. 3. The value of scrap material can have either a high or low sales value relative to the product with which it is associated. Answer : False Difficulty : 2 Objective : 1 Scrap material by definition has a low sales value. 4. Normal spoilage adds to the cost of the job to which it is attributed in a job order costing system. Answer : True Difficulty : 2 Objective : 2 5. When calculating normal spoilage rates, the base should be actual units started in production. Answer : False Difficulty : 2 Objective : 2 The base should be good units started into production. 6. Abnormal spoilage is spoilage that should arise under efficient operating conditions. Answer : False Difficulty : 2 Objective : 2 Abnormal spoilage should not arise under efficient operating conditions. 7. A company whose goal is zero defects would usually treat all spoilage as abnormal. Answer : True Difficulty : 2 Objective : 2 8. Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit. Answer : False Difficulty : 3 Objective : 3 Counting spoiled units usually results in a lower cost per unit. Chapter 18 Page 1 9. Costs in beginning inventory are pooled with costs in the current period when determining the costs of good units under the weighted-average method of process costing. Answer : True Difficulty : 2 Objective : 3 10. Under the weighted-average method, the costs of normal spoilage are added to the costs of their related good units. Hence, the cost per good unit completed and transferred out equals the total costs transferred out divided by the number of good units produced. Answer : True Difficulty : 3 Objective : 3 11. Under the FIFO method, all spoilage costs are assumed to be related to units completed during this period using the unit costs of the current period. Answer : True Difficulty : 3 Objective : 4 12. When spoiled goods have a disposal value, the net cost of spoilage is computed by adding the disposal value to the costs of the spoiled goods accumulated to the inspection point. Answer : False Difficulty : 2 Objective : 4 The net cost of spoilage is computed by subtracting the disposal value from the costs of the spoiled goods accumulated to the inspection point.... View Full Document

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