ACCT303Chapter18

# ACCT303Chapter18 - CHAPTER 18 SPOILAGE, REWORK, AND SCRAP...

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CHAPTER 18 SPOILAGE, REWORK, AND SCRAP 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. 18-17 (20 min.) Weighted-average method, spoilage, equivalent units . Solution Exhibit 18-17 calculates equivalent units of work done to date for direct materials and conversion costs. SOLUTION EXHIBIT 18-17 Summarize Output in Physical Units and Compute Output in Equivalent Units; Weighted-Average Method of Process Costing with Spoilage, Gray Manufacturing Company for November 2009. (Step 1) (Step 2) Equivalent Units Flow of Production Physical Units Direct Materials Conversion Costs Work in process, beginning (given) Started during current period To account for Good units completed and transferred out during current period: Normal spoilage* 100 × 100%; 100 × 100% Abnormal spoilage 50 × 100%; 50 × 100% Work in process, ending (given) 2,000 × 100%; 2,000 × 30% Accounted for Work done to date 1,000 10,150 a 11,150 9,000 100 50 2,000 11,150 9,000 100 50 2,000 11,150 9,000 100 50 600 9,750 18-1

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a From below, 11,150 total units are accounted for. Therefore, units started during current period must be = 11,150 – 1,000 = 10,150. *Degree of completion of normal spoilage in this department: direct materials, 100%; conversion costs, 100%. Degree of completion of abnormal spoilage in this department: direct materials, 100%; conversion costs, 100%. Degree of completion in this department: direct materials, 100%; conversion costs, 30%. 18-18 (20 - 25 min.) Weighted-average method, assigning costs (continuation of 18-17). Solution Exhibit 18-18 summarizes total costs to account for, calculates the costs per equivalent unit for direct materials and conversion costs, and assigns total costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process. SOLUTION EXHIBIT 18-18 Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process; Weighted-Average Method of Process Costing, Gray Manufacturing Company, November 2009. Total
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## This note was uploaded on 01/13/2011 for the course ESCE ACCT411-41 taught by Professor Lawwingkin during the Winter '10 term at Acton School of Business.

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ACCT303Chapter18 - CHAPTER 18 SPOILAGE, REWORK, AND SCRAP...

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