HDFChapter18Solutions12e - CHAPTER 18 SPOILAGE REWORK AND...

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CHAPTER 18 SPOILAGE, REWORK, AND SCRAP 18-2 Spoilage—units of production that do not meet the standards required by customers for good units and that are discarded or sold at reduced prices. Rework—units of production that do not meet the specifications required by customers but which are subsequently repaired and sold as good finished units. Scrap—residual material that results from manufacturing a product. It has low total sales value compared to the total sales value of the product. 18-5 Management effort can affect the spoilage rate. Many companies are relentlessly reducing their rates of normal spoilage, spurred on by competitors who, likewise, are continuously reducing costs. 18-16 (5–10 min.) Normal and abnormal spoilage in units. 1. Total spoiled units 12,000 Normal spoilage in units, 5% × 132,000 6,600 Abnormal spoilage in units 5,400 2. Abnormal spoilage, 5,400 × $10 $ 54,000 Normal spoilage, 6,600 × $10 66,000 Potential savings, 12,000 × $10 $120,000 Regardless of the targeted normal spoilage, abnormal spoilage is non-recurring and avoidable. The targeted normal spoilage rate is subject to change. Many companies have reduced their spoilage to almost zero, which would realize all potential savings. Of course, zero spoilage usually means higher-quality products, more customer satisfaction, more employee satisfaction, and various beneficial effects on nonmanufacturing (for example, purchasing) costs of direct materials. 18-21 (30 min.) Weighted-average method, spoilage. 1. Solution Exhibit 18-21A calculates equivalent units of work done in the current period for direct materials and conversion costs. 18-1
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SOLUTION EXHIBIT 18-21A Summarize Output in Physical Units and Compute Output in Equivalent Units; Weighted-Average Method of Process Costing with Spoilage, Appleton Company for August 2006. (Step 1) (Step 2) Equivalent Units Flow of Production Physical Units Direct Materials Conversion Costs Work in process, beginning (given) 2,0 00 Started during current period (given) 10,000 To account for 12,000 Good units completed and tsfd. out during current period:
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HDFChapter18Solutions12e - CHAPTER 18 SPOILAGE REWORK AND...

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