acycst2 spoilage and losses

The point of inspection is the key to the assignment of spoilage costs.

T

Normal spoilage costs do not attach solely to units transferred out. If units in ending work in process have passed inspection, they should have normal spoilage costs added to them.

T

Abnormal spoilage is spoilage that is inherent in a particular production process and would not arise under efficient operating conditions. Costs of abnormal spoilage are “lost costs,” measures of inefficiency that should be written off directly as losses for the accounting period.

F

Normal spoilage typically expressed as a percentage of goods units passing the inspection point.

T

The costs of normal lost units are reported as product cost, since eventually they become part of the cost of good units.

T

If materials are added 100% at the beginning of the process, then the work in process end will get 100%.

T

When there is no beginning work in process and materials are entered at the beginning of the process, equivalent units of materials are the same as the units started into production.

T

In order to compute the physical unit flow, a company must first compute unit production costs.

F

Under the FIFO method, it is assumed that the beginning work in process is completed before new work is started.

T

Abnormal spoilage is always accounted for on an equivalent unit basis.

T

Which of the following accounts is credited when abnormal spoilage is written off in a normal cost system?

A. Miscellaneous Revenue

B. Loss from Spoilage

C. Finished Goods

D. Work in Process

D

If normal spoilage is detected at the end of the process, the cost of that spoilage should be:

A. included with the cost of the units sold during the period.

B. included with the cost of the units completed in that department during the period.

C. allocated to ending work in process units and units transferred out based on their relative values.

D. none of the above.

B

If there are no units in process at the beginning of the period, then

A. the company must be using a job order cost system.

B. only one computation of equivalent units of production will be necessary.

C. the units started into production will equal the number of units transferred out.

D. the units to be accounted for will equal the units transferred out and the units in process at the end of the period.

D

33. In a cost of production report using process costing, transferred-in costs are similar to the

A. cost of material added at the beginning of production.

B. conversion cost added during the period.

C. cost transferred out to the next department.

D. cost included in beginning inventory.

A

34. A continuous loss:

A. never occurs during the production process.

B. always occurs at the same place in a production process.

C. occurs unevenly throughout a process.

D. occurs evenly throughout the production process.

D

35. The method of neglect handles spoilage that is

A. discrete and abnormal.

B. discrete and normal.

C. continuous and abnormal.

D. continuous and normal.

D

36. Normal spoilage units resulting from a continuous process: 

A. are extended to the EUP schedule.

B. result in a higher unit cost for the good units produced.

C. result in a loss being incurred.

D. cause estimated overhead to increase.

B

37. The cost of normal discrete losses is

A. absorbed by all units past the inspection point on an equivalent unit basis.

B. absorbed by all units completed and transferred out during the period.

C. absorbed by all units in ending inventory.

D. considered a period cost.

A

38. If normal spoilage is detected at an inspection point within the process (rather than at the end), the cost of that spoilage should be

A. included with the cost of the units sold during the period.

B. included with the cost of the units completed in that department during the period.

C. allocated to ending work in process units and units transferred out based on their EUP.

D. allocated to the good units that have passed the inspection point.

D

44. Abnormal spoilage can be:

Continuous, Discrete

A. Yes, Yes

B. No, No

C. Yes, No

D. No, Yes

A

45. The cost of abnormal continuous losses is

A. considered a product cost.

B. absorbed by all units in ending inventory and transferred out on an equivalent unit basis.

C. absorbed by all units past the inspection point.

D. written off as a loss on an equivalent unit basis.

D

Counting spoiled units as part of output units in a process-costing system usually results in a higher cost per unit. 

F

When there is no beginning work in process and materials are entered at the beginning of the process, equivalent units of materials are the same as the units started into production. 

T

The cost of normal lost units are reported as product cost, since eventually they become part of the cost of good units.

T

If materials are added 100% at the beginning of the process, then the work in process end will get 100%. 

T

Units that have passed the inspection point are good units, whereas units that have not passed the inspection point may be good or defective/spoiled. 

T

Normal spoilage costs do not attach solely to units transferred out. If units in ending work in process have passed inspection, they should have normal spoilage costs added to them. 

T

Equivalent units are calculated by

 

a. dividing physical units by the percentage of work done.

 

b. multiplying the percentage of work done by the physical units.

 

c. dividing equivalent units by the percentage of work done.

 

d. multiplying the percentage of work done by the equivalent units of output.

B

Recognition of spoiled units when computing output units:

 

A. highlights the costs of normal spoilage to management

 

B. highlights the costs of normal spoilage to management and focuses management's attention on reducing spoilage

 

C. distorts the accounting data

 

D. focuses management's attention on reducing spoilage

B

If normal spoilage is detected at the end of the process, the cost of that spoilage should be:

 

A. none of the above.

 

B. included with the cost of the units sold during the period.

 

C. allocated to ending work in process units and units transferred out based on their relative values.

 

D. included with the cost of the units completed in that department during the period.

D

The costs of normal spoilage are allocated to the units in ending work-in-process inventory, in addition to completed units if the units:

 

A. in ending work-in-process inventory have passed the inspection point

 

B. in ending inventory have not passed the inspection point

 

C. in ending work-in-process inventory are less than 50% complete

 

D. in ending work in process inventory are more than 50% complete

A

Unacceptable units of production that are discarded or sold for reduced prices are referred to as:

 

A. reworked units

 

B. spoilage

 

C. defective units

 

D. scrap

B

A difference between job costing and process costing is that:

a. Job-costing systems usually distinguish between normal spoilage attributable to a specific job and spoilage common to all jobs. However, process costing normally does not distinguish between normal spoilage attributable to a specific job and spoilage common to all jobs.

b. process costing normally does not distinguish between normal spoilage attributable to a specific job and spoilage common to all jobs.

c. job-costing systems usually do not distinguish between normal spoilage attributable to all jobs and normal spoilage attributable to a specific job.

d. Job-costing systems usually distinguish between normal spoilage attributable to a specific job and spoilage common to all jobs.

A

Normal spoilage rates are calculated based on the total units produced, including both good units and spoiled units. 

F

Which of the following best explains the concept of accretion in a process costing system?

 

A. The loss of materials during the production process.

 

B. The reduction in unit costs resulting from an increase in the total number of units.

 

C. The cost increase due to additional overhead allocation in subsequent processes.

 

D. The accumulation of costs in work-in-process ending inventory.

B