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SPOILAGE, REWORKED UNITS, AND SCRAP true false

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1. Reducing defects helps to reduce costs, but does not 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.;3. The value of scrap material can have either a high or low sales value relative to the product with which it is associated.;4. Normal spoilage adds to the cost of the job to which it is attributed in a job order costing system.;5. When calculating normal spoilage rates, the base should be actual units started in production.;6. Abnormal spoilage is spoilage that should arise under efficient operating conditions.;7. A company whose goal is zero defects would usually treat all spoilage as abnormal.;8. Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit.;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.;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.;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.;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..;13. Normal spoilage costs are usually deducted from the costs of good units.;14. Costs of abnormal spoilage are separately accounted for as losses of the period.;15. In job costing, costs of abnormal spoilage are not considered as inventoriable costs and are therefore written off as costs of the period in which detection occurs.;16. In both job costing and process costing, normal spoilage attributable to a specific job is assigned to that job.;17. When rework is normal and not attributable to any specific job, the costs of rework are charged to manufacturing overhead, and spread through overhead allocation over all jobs.;18. Scrap is usually divided between normal and abnormal scrap.;19. If scrap is returned to the company's storeroom and thus inventoried, it should not have any value in the accounting records.;20. Many companies track scrap only in nonfinancial terms (liters, for example) and record its sale as another revenue item.

 

Paper#23985 | Written in 18-Jul-2015

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