costaccttestbankchap11.doc

MULTIPLE CHOICE32.Managers often cite reductions in the costs of spoilage as a(n): a.major justification for implementing a just-in-time production systemb.measurement of improved output qualityc.immaterial item that is not to be trackedd.indication of improvement in the accounting systemAnswer:aDifficulty:2Objective:1Terms to Learn:spoilage33.Unacceptable units of production that are discarded or sold for reduced prices are referred to as:a.reworked unitsb.spoilagec.scrapd.defective unitsAnswer:bDifficulty:1Objective:1Terms to Learn:spoilage34.Unacceptable units of production that are subsequently repaired and sold as acceptable finished goods are: a.reworked unitsb.spoilagec.scrapd.defective unitsAnswer:aDifficulty:1Objective:1Terms to Learn:rework35.Costs of poor quality production include the:a.opportunity cost of the plant and workersb.effect on current customersc.effect on potential customersd.All of these answers are correct.Answer:dDifficulty:2Objective:1Terms to Learn:spoilage36.Material left over when making a product is referred to as:a.reworked unitsb.spoilagec.scrapd.defective unitsAnswer:cDifficulty:1Objective:1Terms to Learn:scrap37.A production process which involves spoilage and rework occurs in:a.the manufacture of high precision toolsb.semiconductor unitsc.the manufacture of clothingd.All of these answers are correct.Answer:aDifficulty:2Objective:1Terms to Learn:spoilage, rework38.Spoilage that is an inherent result of the particular production process and arises under efficient operating conditions is referred to as:a.ordinary spoilageb.normal spoilagec.abnormal spoilaged.None of these answers is correct.Answer:bDifficulty:2Objective:2Terms to Learn:normal spoilage39.Spoilage that should not arise under efficient operating conditions is referred to as:a.ordinary spoilageb.normal spoilagec.abnormal spoilaged.None of these answers is correct.Answer:cDifficulty:2Objective:2Terms to Learn:abnormal spoilage40.Costs of normal spoilage are usually accounted for as:a.part of the cost of goods soldb.part of the cost of goods manufacturedc.a separate line item in the income statementd.an asset in the balance sheetAnswer:bDifficulty:2Objective:2Terms to Learn:normal spoilage41.Costs of abnormal spoilage are usually accounted for as:a.part of the cost of goods soldb.part of the cost of goods manufacturedc.a separate line item in the income statementd.an asset in the balance sheetAnswer:cDifficulty:2Objective:2Terms to Learn:abnormal spoilage42.The loss from abnormal spoilage account would not appear:a.on the balance sheetb.as a detailed item in the retained earnings schedule of the balance sheetc.as a detailed item on the income statementd.Either a or b is correct.Answer:dDifficulty:2Objective:2Terms to Learn:abnormal spoilage43.Normal spoilage should be computed using as the base the:a.total units completedb.total good units completedc.total actual units started into productiond.None of these answers is correct.Answer:bDifficulty:2Objective:2Terms to Learn:normal spoilage44.Companies that attempt to achieve zero defects in the manufacturing process treat spoilage as:a.scrapb.reworked unitsc.abnormal spoilaged.normal spoilageAnswer:cDifficulty:2Objective:2Terms to Learn:abnormal spoilage45.Which one of the following conditions usually exists when comparing normal and abnormal spoilage to controllability?Normal SpoilageAbnormal Spoilagea.ControllableControllableb.ControllableUncontrollablec.UncontrollableUncontrollabled.UncontrollableControllableAnswer:dDifficulty:2Objective:2Terms to Learn:normal spoilage, abnormal spoilage46.Not counting spoiled units in the equivalent-unit calculation results in:a.lower cost per good unit.b.higher cost per good unitc.better management informationd.Both a and c are correct.Answer:bDifficulty:2Objective:2Terms to Learn:spoilage47.Recognition of spoiled units when computing output units:a.highlights the costs of normal spoilage to managementb.distorts the accounting datac.focuses managements attention on reducing spoilaged.Both a and c are correct.Answer:dDifficulty:2Objective:2Terms to Learn:spoilage, normal spoilageTHE FOLLOWING INFORMATION APPLIES TO QUESTIONS 48 THROUGH 52:Astoria Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $100,000 during the month. Work-in-process records revealed that 4,000 card units were started in January, 2,000 card units were complete, and 1,500 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.48.What are the respective direct material costs per equivalent unit, assuming spoiled units are recognized or ignored?a.$20.00; $35.00b.$25.00; $40.00c.$30.00; $45.00d.$35.00; $50.00Answer:bDifficulty:2Objective:2Terms to Learn:spoilage Calculation forRecognized Problem #IgnoredCost to account for:$100,000$100,000Divided by equivalent units 4,000 2,500Cost per equivalent unit$ 25.00(48)$ 40.00Assigned to:Good units completed(2,000 x $25; $40)$ 50,000$ 80,000Normal spoilage(1,500 x $25)37,500 0Costs transferred out87,500(49/50)80,000WIP ending inventory (500 x $25; $40)12,500(51)20,000Cost accounted for:$100,000$100,00049.What is the direct material cost assigned to good units completed when spoilage units are recognized?a.$50,000b.$100,000c.$80,000d.$87,500Answer:dDifficulty:3Objective:2Terms to Learn:spoilage(see calculations for answer to question 48)50.What is the cost transferred out assuming spoilage units are ignored?a.$87,500b.$80,000c.$50,000d.$77,500Answer:bDifficulty:3Objective:2Terms to Learn:spoilage(see calculations for answer to question 48)51.What are the amounts allocated to the work-in-process ending inventory assuming spoilage units are recognized and ignored, respectively?a.$20,000; $24,500b.$30,000; $34,250c.$12,500; $20,000d.$37,500; $40,000Answer:cDifficulty:3Objective:2Terms to Learn:spoilage(see calculations for answer to question 48)52.Spoilage costs allocated to ending work in process are larger by which method and by how much?a.when spoiled units are recognized, by $2,500b.when spoiled units are recognized, by $4,250c.when spoiled units are ignored, by $7,500d.when spoiled units are recognized, by $7,500Answer:cDifficulty:3Objective:2Terms to Learn:spoilage$20,000 $12,500 = $7,500 or $15.00 x 500 units = $7,500(see calculations for answer to question 48)THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 53 THROUGH 58:Craft Concept manufactures small tables in its Processing Department. Direct materials are added at the initiation of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some units are spoiled due to nondetectible materials defects. Inspection occurs when units are 50% converted. Spoiled units generally constitute 5% of the good units. Data for December 20X5 are as follows:WIP, beginning inventory 12/1/20X510,000 unitsDirect materials (100% complete)Conversion costs (75% complete)Started during December40,000 unitsCompleted and transferred out 12/31/20X538,400 unitsWIP, ending inventory 12/31/20X58,000 unitsDirect materials (100% complete)Conversion costs (65% complete)Costs for December:WIP, beginning Inventory:Direct materials$ 50,000Conversion costs30,000Direct materials added100,000Conversion costs added140,00053.What is the number of total spoiled units?a.1,600 unitsb.2,000 unitsc.2,700 unitsd.3,600 unitsAnswer:dDifficulty:2Objective:2Terms to Learn:spoilageSpoiled units = (10,000 units + 40,000) (38,400 units + 8,000) = 3,600 units54.Normal spoilage totals:a.1,600 unitsb.2,000 unitsc.1,920 unitsd.2,700 unitsAnswer:cDifficulty:2Objective:2Terms to Learn:normal spoilageNormal spoilage = 5% x 38,400 units = 1,920 spoiled units55.Abnormal spoilage totals:a.1,600 unitsb.2,000 unitsc.1,680 unitsd.1,920 unitsAnswer:cDifficulty:3Objective:2Terms to Learn:abnormal spoilageAbnormal spoilage = 3,600 units 1,920 units = 1,680 units(see calculations for answers to questions 53 and 54)56.What is the total cost per equivalent unit using the weighted-average method of process costing?a.$3.00b.$3.60c.$6.60d.$4.60Answer:cDifficulty:2Objective:3Terms to Learn:spoilage, weighted-average methodDirect MaterialsConversion CostsWIP, beginning inventory$ 50,000$ 30,000Costs added during period100,000140,000Total cost to account for150,000170,000Divide by equivalent units50,00047,200Equivalent-unit costs$ 3.00$ 3.60Total cost per equivalent unit = $3.00 + $3.60 = $6.6057.What cost is allocated to abnormal spoilage using the weighted-average process-costing method?a.$ 0b.$ 7,360c.$11,088d.$16,400Answer:cDifficulty:2Objective:3Terms to Learn:abnormal spoilage, weighted-average method1,680 units x $6.60 = $11,088(see calculations for answers to questions 55 and 56)58.What are the amounts of direct materials and conversion costs assigned to ending work in process using the weighted-average process-costing method?a.$18,720; $24,000b.$22,900; $19,820c.$24,000; $18,720d.$28,560; $14,160Answer:cDifficulty:2Objective:3Terms to Learn:spoilage, weighted-average methodDirect materials = 8,000 units x $3.00 = $24,000Conversion costs = 5,200 units x $3.60 = $18,720(see calculations for answers to question 56)59.The cost per good unit in the weighted-average method is equal to the:a.total cost of direct materials and conversion costs per equivalent unit, plus a share of normal spoilageb.sum of the costs per equivalent unit of direct materials, and conversion costsc.total costs divided by total equivalent unitsd.None of these answers is correct.Answer:aDifficulty:2Objective:3Terms to Learn:spoilage, weighted-average method60.Under the FIFO method, all spoilage costs are assumed to be related to the units:a.in beginning inventory, plus the units completed during the pleted during the periodc.in ending inventoryd.in both beginning and ending inventory plus the units completed during the periodAnswer:bDifficulty:2Objective:4Terms to Learn:spoilage, first-in, first-out methodTHE FOLLOWING INFORMATION APPLIES TO QUESTIONS 61 THROUGH 64:Cartwright Custom Carpentry manufactures chairs in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to nondetectible material defects. Spoiled units generally constitute 3% of the good units. Data provided for March 20X5 are as follows:WIP, beginning inventory 3/1/20X530,000 unitsDirect materials (100% complete)Conversion costs (89.5% complete)Started during March80,000 unitsCompleted and transferred out 86,000 unitsWIP, ending inventory 3/31/20X520,000 unitsDirect materials (100% complete)Conversion costs (75% complete)Costs:WIP, beginning inventory:Direct materials$ 70,000Conversion costs40,000Direct materials added160,000Conversion costs added120,00061.What are the normal and abnormal spoilage units, respectively, for March when using FIFO?a.2,580 units; 1,420 unitsb.1,950 units; 1,390 unitsc.1,690 units; 1,050 unitsd.1,420 units; 2,000 unitsAnswer:aDifficulty:3Objective:4Terms to Learn:normal spoilage, abnormal spoilageNormal spoilage = 3% x 86,000 units = 2,580 spoiled unitsAbnormal spoilage = (30,000 units + 80,000) (86,000 units + 20,000) 2,580 = 1,420 units62.What costs would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing?a.$5,890.64; $9,133.20b.$5,890.64; $5,826.00c.$6,469.64; $7,690.36d.$9,133.20; $5,026.80Answer:dDifficulty:3Objective:4Terms to Learn:first-in, first-out method, normal spoilage, abnormal spoilageDirect MaterialsConversion CostsWIP, beginning inventoryCosts added during period$160,000$ 120,000Total cost to account for160,000120,000Divided by equivalent units80,000*78,150*Equivalent-unit costs$ 2.00$ 1.54(56,000 + 2,580 + 1,420 + 20,000) = 80,000 units(see calculations for answers to question 61)(3,150 + 56,000 + 2,580 + 1,420 + 15,000) = 78,150 unitsNormal Spoilage = 2,580 units x $3.54 = $9,133.20Abnormal Spoilage = 1,420 units x $3.54 = $5,026.8063.What costs are allocated to the ending work-in-process inventory for direct materials and conversion costs, respectively, using the FIFO method of process costing?a.$38,250; $24,850b.$40,000; $23,100c.$40,000; $21,590d.$49,500; $13,600Answer:bDifficulty:3Objective:4Terms to Learn:first-in, first-out method, spoilageDirect materials: 20,000 units x $2.00 = $40,000Conversion costs: 15,000 units x $1.54 = $23,100(see calculations for answers to question 62)64.Which of the following journal entries correctly represents the transfer of completed goods for the current period using the FIFO method of process costing?a.Finished Goods 10,560.28Loss from Spoilage 10,560.28b.Loss from Spoilage 5,026.80Finished Goods 5,026.80c.Finished Goods327,251.00Work in Process327,251.00d.Finished Goods401,700.00Work in Process401,700.00Answer:cDifficulty:3Objective:4Terms to Learn:first-in, first-out method, spoilageAbnormal spoilage$ 5,026.80Beginning WIP completed110,000.00Costs added4,851.00Started and completed 198,240.00Normal spoilage 9,133.20Total cost transferred out$327,251.00(see calculations for answers to questions 62 and 63)65.The standard-costing method:a.adds a layer of complexity to the calculation of equivalent-unit costs in a process-costing environmentb.makes calculating equivalent-unit costs unnecessaryc.requires an analysis of the spoilage costs in beginning inventoryd.requires an analysis of the spoilage costs in ending inventoryAnswer:bDifficulty:2Objective:5Terms to Learn:standard-costing method, spoilage66.The inspection point is thea.stage of the production cycle where products are checked to determine whether they are acceptable or unacceptable unitsb.point at which costs are allocated between normal and abnormal spoilagec.point at which the calculation of equivalent units is maded.None of these answers is correct.Answer:aDifficulty:2Objective:5Terms to Learn:inspection point67.When spoiled goods have a disposal value, the net cost of the spoilage is computed by:a.deducting disposal value from the costs of the spoiled goods accumulated to the inspection pointb.adding the costs to complete a salable product to the costs accumulated to the inspection pointc.calculating the costs incurred to the inspection pointd.None of these answers is correct.Answer:aDifficulty:2Objective:5Terms to Learn:spoilage68.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 inventory have not passed the inspection pointb.in ending work-in-process inventory have passed the inspection pointc.in ending work in process inventory are more than 50% completed.in ending work-in-process inventory are less than 50% completeAnswer:bDifficulty:3Objective:5Terms to Learn:inspection point, normal spoilage69.The Harleysville Manufacturing Shop produces motorcycle parts. Typically, 10 pieces out of a job lot of 1,000 parts are spoiled. Costs are assigned at the inspection point, $50.00 per unit. Spoiled pieces may be disposed at $10.00 per unit. The spoiled goods must be inventoried appropriately when the normal spoilage is detected. The current job requires the production of 2,500 good parts.Which of the following journal entries properly reflects the recording of spoiled goods?a.Materials Control 200Manufacturing Overhead Control 800Work-in-Process Control 1,000b.Materials Control 250Manufacturing Overhead Control1,000Work-in-Process Control1,250c.Work-in-Process Control1,250Materials Control 250Manufacturing Overhead Control1,000d.Manufacturing Overhead Control1,000Materials Control 200Work-in-Process Control