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SPOILAGE, REWORKED UNITS, AND SCRAP quention

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78. Weather Instruments assembles products from component parts. It has two departments that process all products. During January, the beginning work in process in the assembly department was half complete as to conversion and complete as to direct materials. The beginning inventory included \$12,000 for materials and \$4,000 for conversion costs. Overhead is applied at the rate of 50% of direct manufacturing labor costs. Ending work-in-process inventory in the assembly department was 40% complete. All spoilage is considered normal and is detected at the end of the process.;Beginning work in process in the finishing department was 75% complete as to conversion and ending work in process was 25% converted. Direct materials are added at the end of the process. Beginning inventories included \$16,000 for transferred-in costs and \$10,000 for direct manufacturing labor costs. Overhead in this department is equal to direct manufacturing labor costs. Additional information about the two departments follows;Assembly Finishing;Beginning work-in-process units 20,000 24,000;Units started this period 40,000?;Units transferred this period 50,000 54,000;Ending work-in-process units 8,000 20,000;Material costs added \$44,000 \$28,000;Direct manufacturing labor \$16,000 \$24,000;Required;Prepare a production cost worksheet using weighted-average for the assembly department and FIFO for the finishing department.;78. Answer;78.;79. Valentine Florists operate a flower shop. Because most of their orders are via telephone or fax, numerous orders have to be reworked. The average cost of the reworked orders is \$6: \$3.75 for labor, \$1.50 for more flowers, and \$0.75 for overhead. This ratio of costs holds for the average original order. On a recent day, the shop reworked 48 orders out of 249. The original cost of the 48 orders totaled \$720. The average cost of all orders is \$18.75, including rework, with an average selling price of \$30;Required;Prepare the necessary journal entry to record the rework for the day if the shop charges such activities to Arrangement Department Overhead Control. Prepare a journal entry to transfer the finished goods to Finished Goods Inventory.;80. Springfield Sign Shop manufactures only specific orders. It uses a standard cost system. During one large order for the airport authority, an unusual number of signs were spoiled. The normal spoilage rate is 10% of units started. The point of first inspection is half way through the process, the second is three-fourths through the process, and the final inspection is at the end of the process. Other information about the job is as follows;Signs started 3,000;Signs spoiled 450;Direct materials put into process at beginning \$ 60,000;Conversion costs for job \$120,000;Standard direct material costs per sign \$27;Standard conversion cost per sign \$54;Average point of spoilage is the 3/4 completion point;Average current disposal cost per spoiled sign \$15;Required;Make necessary journal entries to record all spoilage.;CRITICAL THINKING;81. Busy Hands Craft Company is a small manufacturing company that specializes in arts and crafts items. It recently bought an old textile mill that it has refurbished to manufacture and dye special cloth to be sold in its craft shops. However, it discovered something new for its accounting system. The company never before had finished goods that did not meet standard, leftover materials from processing runs, or unacceptable outputs.;Required;As the business consultant for the company, explain how it can handle the items mentioned. Include any potential problems with the accounting procedures.;82. You are the chief financial officer of a lumber mill, and are becoming quite concerned about the spoilage, scrap, and reworked items associated with your production processes. Your firm produces mainly products for the building industry.;Required;Discuss the problems associated with these items, and the methods your company can use to reduce spoilage, scrap, and reworked items.;83. Harriet has been reviewing the accounting system for her company and 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.;2;84. Shazam Machines produces numerous types of money change machines. All machines are made in the same production department and many use exactly the same processes. Because customers have such different demands for the machine characteristics, the company uses a job-costing system. Unfortunately, some of the production managers have been upset for the last few months when their jobs were charged with the spoilage that occurred over an entire processing run of several types of machines. Some of the best managers have even threatened to quit unless the accounting system is changed.;Required;What recommendations can you suggest to improve the accounting for spoilage?;85. For each of the following (actual real-world examples) develop products that can be sold from the listed scrap.;a. The Federal Reserve Banks destroy old money. Burning this money is usually forbidden under the environmental laws of most municipalities.;b. A manufacturer of cotton undergarments for female prisoners has much cotton left over. The manufacturer is located in a very rural area of Alabama.;c. A hog renderer that has hog bristles as a result of the slaughtering process.

Paper#24552 | Written in 18-Jul-2015

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