Problem 18-24, 25 Weighted-average method, spoilage

Chipcity is a fast-growing manufacturer of computer chips. Direct materials are added at the start of the
production process. Conversion costs are added evenly during the process. Some units of this product
are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are
disposed of at zero net disposal value. Citychip uses the weighted-average method of process costing.

Summary data for September 2011 are: Physical Units Direct

Computer Chips Materials
WIP, Inventory (September 1) 600 $96,000
Degree of completion of BWIP 100%
Started in September 2,550
Good units completed and T/O during September 2,100
WIP, Inventory (September 30) 450
Degree of completion of EWIP 100%
Total costs added during September $567,000
Normal Spoilage as a % of good units 15%
Degree of completion of normal spoilage 100%
Degree of completion of abnormal spoilage 100%

Citychip Cost of Production Report Degree of Completion Physical Flow

Units to Account for: D/M Conversion
Added to mfg. Beginning Evenly
BWIP 100% 30% 600
Started during April 2,550
Total 3,150
Units Accounted for:
Good units completed 2,100
From BWIP 0% 70% 600
Started And Completed 100% 100% 1,500
Normal Spoilage (15% of good units) 100% 100% 315
Abnormal Spoilage (Final Inspection) 100% 100% 285
EWIP 100% 40% 450
Total 3,150
Calculation of Equivalent Units
FIFO Equivalent Units (A)
Plus BWIP EU from previous period
Weighted Average Equivalent Units (B)

Costs to Account for:

BWIP
Current Costs Added This Period (1)
Total (2)
Cost per Equivalent Unit:
FIFO (1) / (A)
Weighted Average (2) / (B)
Costs Accounted for: Fifo Method (Problem 18-25)
Costs Associated with Completed Units
From BWIP
 Costs Assigned to BWIP
D/M
Conversion Costs
Total
From Units Started & Completed
Normal Spoilage
Total Cost Associated with Units Transferred-out
Abnormal Spoilage
Cost Assigned to EWIP Units
D/M Costs
Conversion Costs
Total Cost Assigned to EWIP
Total Costs Accounted for
Costs Accounted for: Weighted Average Method (Problem 18-24)
Total Cost Associated with Units Transferred-out
Costs Associated with Units Completed
Normal Spoilage
Total Cost Associated with Units Transferred-out
Abnormal Spoilage
Cost Assigned to EWIP Units
D/M Costs
Conversion Costs
Total
Total Costs Accounted for

Journal Entries for both FIFO and Weighted Average Methods

Fifo Method
Dr
Work-in-Process 567,000
Direct Materials Inventory
To record direct materal usage for this production period.

Work-in-Process 230,400
Various Accounts
To assign direct labor and MOH to production.

Finished Goods Inventory 705,591

Work-in-Process
To record the transfer of completed units to FG.

Abnormal Production Loss 87,691

Work-in-Process
To record production losses exceeding those considered
normal to the manufacturing process.

FIFO
Work-in-Process
BWIP 111,300
D/M 567,000
Conversion 230,400
T/O
AL
EWIP 115,419
 added at the start of the
ome units of this product
ods. Spoiled units are
hod of process costing.

Conversion
Costs
$15,300
30%

40%
$230,400
600
100%
100%

Equivalent Units
D/M Conversion

0 420 B
1,500 1,500 C
315 315
285 285
450 180 D

2,550 2,700
600 180 A
3,150 2,880

D/M Conversion Total

$96,000 $15,300 $111,300
567,000 230,400 797,400
$663,000 $245,700 $908,700

$222.3529 $85.3333 $307.6863

$210.4762 $85.3125 $295.7887

$160.00
$85.00
 $96,000.00 $15,300.00 $111,300.00 $245.00
0.00 0.00
35,840.00 35,840.00
$96,000.00 $51,140.00 $147,140.00 $245.2333
333,529.41 128,000.00 461,529.41 $307.6863
70,041.18 26,880.00 96,921.18 $307.6863
$499,570.59 $206,020.00 $705,590.59 $335.9955
$63,370.59 $24,320.00 $87,690.59 $307.6863

$100,058.82 $100,058.82
$15,360.00 15,360.00
$100,058.82 $15,360.00 $115,418.82
$663,000.00 $245,700.00 $908,700.00 $908,700.00

$442,000.00 $179,156.25 $621,156.25 $295.7887

66,300.00 26,873.44 93,173.44 $295.7887
$508,300.00 $206,029.69 $714,329.69 $340.1570
$59,985.71 $24,314.06 $84,299.78 $295.7887

$94,714.29 $94,714.29
$15,356.25 15,356.25
$94,714.29 $15,356.25 $110,070.54
$663,000.00 $245,700.00 $908,700.00

Fifo Method Weighted Average Method

Cr Dr Cr
567,000
567,000 567,000

230,400
230,400 230,400

714,330
705,591 714,330

84,300
87,691 84,300

FIFO Weighted Average

Work-in-Process Work-in-Process
111,300
 567,000
230,400
705,591 714,330
87,691 84,300
110,071
Problem 18-26 Standard-costing method, spoilage

Refer to the information in Exercise 18-24. Suppose Chipcity determines standard costs of
and $75 per equivalent unit for conversion costs for both beginning WIP and work done in the current period. Do Exe
the standard-costing method.

Solution:
Citychip Cost of Production Report Degree of Completion Physical Flow
Units to Account for: D/M Conversion
Added to mfg. Beginning Evenly
BWIP 100% 30% 600
Started during April 2,550
Total 3,150
Units Accounted for:
Completed Units 2100
From BWIP 0% 70% 600
Started And Completed 100% 100% 1,500
Normal Spoilage (15% of good units) 100% 100% 315
Abnormal Spoilage (Final Inspection) 100% 100% 285
EWIP 100% 40% 450
Total 3,150
Calculation of Equivalent Units
FIFO Equivalent Units
Plus BWIP EU from previous period
Weighted Average Equivalent Units

Standard Costs to Account for:

BWIP
Current Costs Added This Period 510,000 202,500
Total

Cost per Equivalent Unit: Standard Cost Method

Costs Accounted for: Standard Cost Method

Costs Associated with Completed Units 2,100
From BWIP
Costs Assigned to BWIP
D/M
Conversion Costs
Total
From Units Started & Completed
Normal Spoilage $230.00
Total Cost Associated with Units Transferred-out $86.25 $664,125
Abnormal Spoilage $316.25 $316.25
Cost Assigned to EWIP Units
D/M Costs
Conversion Costs
Total Cost Assigned to EWIP
 Total Costs Accounted for

Journal Entries for Standard Costs Method

Standard Cost Method
Dr
Work-in-Process 510,000
DM Variances 57,000
Direct Materials Inventory
To record direct materal usage for this production period.

Work-in-Process 202,500
DL & MOH Variances 27,900
Various Accounts
To assign direct labor and MOH to production.

Finished Goods Inventory 664,125

Work-in-Process
To record the transfer of completed units to FG.

Abnormal Production Loss 78,375

Work-in-Process
To record production losses exceeding those considered
normal to the manufacturing process.

Standard Cost
Work-in-Process
BWIP 133,500
D/M 510,000
Conversion 202,500
T/O
AL
EWIP 103,500
dard costs of $200 per equivalent unit for direct materials
ork done in the current period. Do Exercise 18-24 using

Equivalent Units
D/M Conversion

0 420
1,500 1,500
315 315
285 285
450 180

2,550 2,700
600 180
3,150 2,880

D/M Conversion Total

$120,000 $13,500 $133,500
510,000 202,500 712,500
$630,000 $216,000 $846,000

$200 $75 $275

$200 $75
$200 $75

$120,000 $13,500 $133,500

$0 $0
$31,500 $31,500
$120,000 $45,000 $165,000 $275
$300,000 $112,500 $412,500 $275
$63,000 $23,625 $86,625 $275
$483,000 $181,125 $664,125 $316.25
$57,000 $21,375 $78,375 $275

$90,000 $90,000
$13,500 $13,500
$90,000 $13,500 $103,500
 $630,000 $216,000 $846,000

Standard Cost Method

Cr

567,000

230,400

664,125

78,375

Standard Cost
Work-in-Process

664,125
78,375
Problem 18-38 Physical units, inspection at various stages of completion

Given:
Fantastic Furniture manufactures plastic lawn furniture in a continuous process. The company
pours molten plastic into molds and then cools the plastic. Materials are added at the beginning
of the process, and conversion is considered uniform through the period. Occasionally, the
plastic does not completely fill a mold because of air pockets, and the chair is then considered
spoiled. Normal spoilage is 6% of the good units that pass inspection. The following information
pertains to March, 2011:
Normal spoilage as a % of good units that pass inspection 6%
Total units spoiled 1,000
Units started during March 12,000
WIP, beginning (20% completed for Conversion) 1,400
WIP, ending (70% completed for Conversion) 1,100
Started and completed 9,900
Required: Compute the normal and abnormal spoilage in units, assuming the inspection
point is at (a) the 15% stage of completion, (b) the 40% stage of completion, and (c) the
100% stage of completion.

Inspection Point
(A) 15% (B) 40% (C) 100%
Physical Flow Physical Flow Physical Flow
Units to Account for:
BWIP (20% Complete as to Conversion) 1,400 1,400 1,400
Started during March 12,000 12,000 12,000 Start
Total 13,400 13,400 13,400 12,000
Units Accounted for:
Completed Units 11,300
From BWIP 1,400 1,400 1,400
Started And Completed 9,900 9,900 9,900
Total Spoilage 1,000 1,000 1,000
EWIP (70% Complete as to Conversion) 1,100 1,100 1,100
Total 13,400 13,400 13,400
(A) 15% (B) 40% (C) 100%
Supporting Calculations for Normal Loss
Inspected from Started 12,000 12,000 10,900
Inspected from BWIP 1,400 1,400
Total Inspected 12,000 13,400 12,300
Total Lost Units (1,000) (1,000) (1,000)
Good Units 11,000 12,400 11,300
Normal Loss (6%) 660 744 678
Abnornal loss 340 256 322
(A) 15% (B) 40% (C) 100%
Inspected Units: Supporting Calculations for Normal Loss
Started & completed 9,900 9,900 9,900
BWIP 1,400 1,400
EWIP 1,100 1,100
Lost Units 1,000 1,000 1,000
Total Inspected 12,000 13,400 12,300
Total Lost Units (1,000) (1,000) (1,000)
Good Units 11,000 12,400 11,300
Normal Loss (6%) 660 744 678
Abnornal loss 340 256 322
 BWIP EWIP
1,400 1,100
20% 70% BWIP
1,400
Good
Start Units
12,000 11,300 S&C
A B C 9,900

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
% %

Inspect
15%
Loss
1,000

Normal Abnormal
6% of good units 340
passing inspection
point 660
Inspect Inspect
40% 100%
Loss Loss
1,000 1,000

Normal Abnormal Normal

6% of good units 256 6% of good units Abnormal
passing inspection passing inspection 322
point 744 point 678
Problem 18-39 (Weighted-average method, inspection at 80% completion)

The Kim Company is a furniture manufacturer with two departments: molding and finishing. The company uses the w
of process costing. In August, the following data were recorded for the Finishing Department:

Units of BWIP 12,500

Percentage completion of BWIP 25%
Units started 87,500
Units completed 62,500
Units in EWIP 25,000
Percentage completion of EWIP 95%
Spoiled units 12,500
Total costs added during current period:
Direct materials $819,000
Direct manufacturing labor $794,500
Manufacturing overhead $770,000
BWIP:
Direct material costs $0
Transferred-in costs $103,625
Conversion costs $52,500
Cost of units transferred in during current period $809,375

Conversion costs are added evenly during the process. Direct materials costs are added when production is
point is at the 80% stage of production. Normal spoilage is 10% of all good units that pass inspection. Spoiled units
net disposal value.

For August, summarize total costs to account for, and assign these costs to units completed and transferred out (incl
abnormal spoilage, and to units in ending work in process.

Kim Company: Finishing Department Cost of Production Report

Degree of Completion
Added at the: Beginning 90% Evenly
Units to Account for: Trans-in D/M Conversion
BWIP 100% 0% 25%
Transferred-in to Finishing Department
Total
Units Accounted for:
Completed: 62,500 Units
From BWIP 0% 100% 75%
Started And Completed 100% 100% 100%
N. Spoilage (10% of good units that pass inspect. pt.) 100% 0% 80%
Abnormal Spoilage (Inspection at 80%) 100% 0% 80%
EWIP 100% 100% 95%
Total
Calculation of Equivalent Units
FIFO Equivalent Units
Plus BWIP EU from previous period
Weighted Average Equivalent Units
Costs to Account for:
BWIP
Current Costs Added This Period
Total
Cost per Equivalent Unit:
Weighted Average
Costs Accounted for: Weighted Average Method
Costs Associated with Completed Units 62,500
Normal Spoilage
Abnormal Spoilage
Cost Assigned to EWIP Units
Total Costs Accounted for

Allocation of Normal Spoilage to EWIP and Transferred-out units:

Physical good units which passed through the inspection point this period

Cost Assigned to EWIP Units

Trans-in D/M Conversion
Pre -allocation balance $228,250 $234,000 $399,000
Allocation of normal spoilage $22,825 $0 $33,600
Post-allocation balance $251,075 $234,000 $432,600
Abnormal Spoilage
Total costs accounted for

Journal Entries for Weighted Average Methods Weighted Average Method

Dr
Work-in-Process -- Finishing Department 809,375
Work-in-Process -- Molding Department
To record the transfer of partially completed units to the
finishing department for additional production activities.

Work-in-Process -- Finishing Department 819,000

Direct Materials Inventory
To record direct materal usage for the month of April

Work-in-Process -- Finishing Department 1,564,500

Various Accounts
To record conversion costs for the month of April

Finished Goods Inventory 2,346,687.50

Work-in-Process -- Finishing Department
To record the transfer of finished units to the
finishing goods inventory.

Abnormal Production Loss -- Finishing Department 84,637.50

Work-in-Process -- Finishing Department
To record abnormal loss

Weighted Average
 WIP - Finishing Department
156,125
Note: Cost to account for $3,349,000 809,375
Cost accounted for $3,349,000 819,000
1,564,500

917,675
nd finishing. The company uses the weighted-average method
g Department:

$1,564,500

re added when production is 90% complete. The inspection

that pass inspection. Spoiled units are disposed of at zero

s completed and transferred out (including normal spoilage), to

Equivalent Units
Physical Flow Transferred-in D/M Conversion

12,500
87,500
100,000

12,500 0 12,500 9,375 B

50,000 50,000 50,000 50,000 C
8,750 8,750 0 7,000
3,750 3,750 0 3,000
25,000 25,000 25,000 23,750 D
100,000

(A) 87,500 87,500 93,125

12,500 0 3,125 A
(B) 100,000 87,500 96,250
 Trans-in D/M Conversion Total
$103,625 $0 $52,500 $156,125
(1) 809,375 819,000 1,564,500 3,192,875
(2) $913,000 $819,000 $1,617,000 $3,349,000

(2) / (B) $9.130 $9.360 $16.800 $35.290

$570,625.00 $585,000 $1,050,000 $2,205,625.00 $35.290

$79,887.50 $0 $117,600 $197,487.50 $22.570
$34,237.50 $0 $50,400 $84,637.50 $22.570
$228,250.00 $234,000 $399,000 $861,250.00
$913,000.00 $819,000 $1,617,000 $3,349,000.00

EWIP Trans-out Total

25,000 62,500 87,500

Costs Associated with Completed Units:

Total Trans-in D/M Conversion Total Grand Total
$861,250 $570,625.00 $585,000 $1,050,000 $2,205,625.00 $3,066,875.00
$56,425 $57,062.50 $0 $84,000 $141,062.50 $197,487.50
$917,675 $627,687.50 $585,000 $1,134,000 $2,346,687.50 $3,264,362.50
$84,637.50
$3,349,000.00

Weighted Average Method

Cr

809,375

819,000

1,564,500

2,346,687.50

84,637.50

Weighted Average
WIP - Finishing Department

2,346,687.50 $37.5470
84,637.50 $22.5700
Problem 18-27 Spoilage and job costing

Barrett Kitchens produces a variety of items in accordance with special job orders from hospitals, plant
cafeterias, and university dormitories. An order for 2,100 cases of mixed vegetables costs $9 per case: direct
materials, $4; direct manufacturing labor, $3; and manufacturing overhead allocated, $2. The manufacturing
overhead rate INCLUDES a provision for normal spoilage. Consider each requirement independently.

1. Assume that a laborer dropped 420 cases. Suppose part of the 420 cases could be sold to a nearby prison
for $420 cash. Prepare a journal entry to record this event. Calculate and explain briefly the unit cost of the
remaining 1,680 cases.
Dr Cr
Cash 420
Abnormal Spoilage Loss 3,360
Work-in-Process Control 3,780
To record the cost of 420 spoiled cases of mixed vegetables as
an abnormal loss -- laborer error.

Cost Item Units Cost/Unit WIP - Mixed Vegetables Job

D/M 2,100 $4.00 8,400
DML 2,100 $3.00 6,300
MOH 2,100 $2.00 4,200
Total 2,100 $9.00 18,900
AL (420) ($9.00) 3,780
Total 1,680 $9.00 15,120
15,120
Note: Unit cost of remaining cases stays the same at $9.

2. Refer to the original data. Tasters at the company reject 420 of the 2,100 cases. The 420 cases are disposed
of for $840. Assume that this rejection rate is considered normal. Prepare a journal entry to record this
event, and
a. Calculate the unit cost if the rejection is attributable to exacting specifications of this particular job.

The rejection is due to exacting specifications of this specific job. Dr Cr

Cash 840
Work-in-Process Control 840
To record the loss recovery from 420 spoiled cases of mixed
 vegetables.

Cost Item Units Cost/Unit WIP - Mixed Vegetables Job

D/M 2,100 $4.00 8,400
DML 2,100 $3.00 6,300
MOH 2,100 $2.00 4,200
Total 2,100 $9.00 18,900
Loss recovery (420) ($2.00) 840
Total 1,680 $10.75 18,060

Note: Unit cost of remaining cases increases to $10.75

b. Calculate the unit cost if the rejection is characteristic of the production process and is not attributable
to this specific job.

The rejection is characteristic of the production process and is not

attributable to this specific job. Dr Cr
Cash 840
Manufacturing Department Overhead Control 2,940
Work-in-Process Control 3,780
To record the cost of 420 spoiled cases of mixed vegetables as a
normal loss.

Cost Item Units Cost/Unit WIP - Mixed Vegetables Job

D/M 2,100 $4.00 8,400
DML 2,100 $3.00 6,300
MOH 2,100 $2.00 4,200
Total 2,100 $9.00 18,900
NL (420) ($9.00) 3,780
Total 1,680 $9.00 15,120
15,120
Note: Unit cost of remaining cases stays the same at $9.

c. Are unit costs the same in requirements 2a and 2b? Explain your reasoning briefly.

See T- accounts in part 2a and 2b above.

3. Refer to the original data. Tasters at the company reject 420 cases that had insufficient salt. The product can be
in a vat, salt can be added, and the product can be reprocessed into jars. This operation, which is considered no
will cost $420. Prepare a journal entry to record this event and:

a. Calculate the unit cost of all the cases if this additional cost was incurred because of the exacting specificati
this particular job.
The added operation (to add salt) is due to exacting specifications of this specific job.
1 ($2 MOH rate rate does not include an adjustment for rework) (ADDED DATA)
0 ($2.10 MOH rate rate includes include an adjustment for rework) (ADDED DATA)

Total Estimated MOH Job #1 Cost Item Units Cost/Unit

IM 6,000 D/M 2,900 $4.00
IL 5,000 DML 2,900 $3.00
O 3,000 MOH 2,900 $2.00
Re 700 Total 2,900 $9.00
Rework
14,700 Total 2,900 $9.00

Job #2 Cost Item Units Cost/Unit

1 MOHR 2.000 Unit D/M 2,000 $4.00
MOHR(Rework) = 2.100000 Unit DML 2,000 $3.00
MOH 2,000 $2.00
Total 2,000 $9.00
Rework
Total 2,000 $9.00

Actual & Applied MOH Job #3 Cost Item Units Cost/Unit

IM 6,000 D/M 2,100 $4.00
IL 5,000 5,800 DML 2,100 $3.00
O 3,000 4,000 MOH 2,100 $2.00
Re 700 4,200 Total 2,100 $9.00
1 Re 420 Rework
2 420 Rework Specific
15,120 14,420 Total 2,100 $9.20
Note unit cost per case for Job #3

J/E 1 Actual & Applied MOH

Salt Inventory
Wages Payable
Accumulated Depreciation Equipment
To record the rework cost of adding salt to fix 420 cases of rejected mixed
vegetables. This extra processing cost is considered normal and due to
exacting specifications of Job #3.

J/E 2 Work-in-Process Control, Job #3

Actual & Applied MOH
To charge the rework costs to Job #3.
 b. Calculate the unit cost of all the cases if this additional cost occurs regularly because of difficulty in seasoni
The rework operation occurs regularly and is considered part of the normal manufacturing process.

($2 MOH rate includes an adjustment for rework) (ADDED DATA)

3b Estimated MOH Job #1 Cost Item Units Cost/Unit

IM 5,700 D/M 2,900 $4.00
IL 4,800 DML 2,900 $3.00
O 2,800 MOH 2,900 $2.00
Re 700 Total 2,900 $9.00
Rework
14,000 Total 2,900 $9.00

1 MOHR(Rework) = 2.0000 Unit Job #2 Cost Item Units Cost/Unit

MOHR 1.9000 Unit D/M 2,000 $4.00
DML 2,000 $3.00
MOH 2,000 $2.00
Total 2,000 $9.00
Rework
Total 2,000 $9.00

Actual & Applied MOH Job #3 Cost Item Units Cost/Unit

IM 5,700 D/M 2,100 $4.00
IL 4,800 5,800 DML 2,100 $3.00
O 2,800 4,000 MOH 2,100 $2.00
Re 420 4,200 Total 2,100 $9.00
Rework
13,720 14,000 Total 2,100 $9.00
Note: Unit cost per case
remained at $9.00 for Job #3.

J/E 1 Actual & Applied MOH

Salt Inventory
Wages Payable
Accumulated Depreciation Equipment
To record the rework cost of adding salt to fix 200 cases of rejected mixed
vegetables. This extra processing cost is considered normal and allocated
to all jobs.

c. Are unit costs the same in requirements 3a and 3b? Explain your reasoning briefly.

See T- accounts in part 3a and 3b above.

salt. The product can be placed
n, which is considered normal,

of the exacting specifications of

WIP - Mixed Vegetables Job

11,600
8,700
5,800
26,100

26,100

WIP - Mixed Vegetables Job

8,000
6,000
4,000
18,000

18,000

WIP - Mixed Vegetables Job

8,400
6,300
4,200
18,900

420
19,320

Dr Cr
420
75
325
20

420
420
se of difficulty in seasoning.
cturing process.

WIP - Mixed Vegetables Job

11,600
8,700
5,800
26,100

26,100

WIP - Mixed Vegetables Job

8,000
6,000
4,000
18,000

18,000

WIP - Mixed Vegetables Job

8,400
6,300
4,200
18,900
0
18,900

Dr Cr
420
75
325
20
Problem 18-29 Scrap, job costing

The Morgan Company has an extensive job-costing facility that uses a variety of metals.
Consider each requirement independently.

1. Job 372 uses a particular metal alloy that is not used for any other job. Assume that
scrap is material in amount and sold for $520 quickly after it is produced.
Prepare the J/E to record scrap sales specific to Job #372.
(overhead rate not adjusted for expected scrap; why?)
Dr Cr
Cash 520
Work-in-Process, Control (Job # 372) 520
To record material scrap sales specific to Job #372.

2. The scrap from Job 372 consists of a metal used by many other jobs. No record is
maintained of the scrap generated by individual jobs. Assume that scrap is accounted
for at the time of its sale. Scrap totaling $4,400 is sold. Prepare two alternative
journal entries that could be used to account for the sale of scrap.
Prepare the J/E to record scrap sales common to many jobs.
a. Usual method if scrap sales is usually certain and material:
(overhead rate adjusted downward for expected scrap; why?)
Dr Cr
Cash 4,400
Manufacturing Department Overhead Control 4,400
To record material scrap sales common to many jobs.

b. Usual method if scrap sales is usually immaterial and uncertain:

(overhead rate not adjusted for expected scrap; why?)
Dr Cr
Cash 4,400
Scrap Sales 4,400
To record relatively immaterial amounts of scrap sales
common to many jobs.

3. Suppose the scrap generated in requirement 2 is returned to the storeroom for future
use, and a journal entry is made to record the scrap. A month later, the scrap is reused
as direct material on a subsequent job. Prepare the journal entries to record these
transactions.
Prepare the J/E to record scrap returns to inventory and later redistribution as DM.
(overhead rate adjusted downward for expected scrap; why?)
Dr Cr
Raw Materials Inventory ?$ 4,400
Manufacturing Department Overhead Control 4,400
To record the scrap materials returned to inventory for later use.

Work-in-Process, Control, Job #? 4,400

Raw Materials Inventory 4,400
To record the requisition of scrap materials reissued to production.
Problem 18-35: Spoilage in job-order costing.

Crystal Clear Machine Shop is a manufacturer of motorized carts for vacation resorts. Peter Cruz, the
plant manager of Crystal Clear, obtains the following information for Job #10 in August 2010. A total of
32 units were started, and 7 spoiled units were detected and rejected at final inspection, yielding 25
good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the
inspection point are $1,450 per unit. The current disposal price of the spoiled units is $230 per unit.
When the spoilage is detected, the spoiled goods are inventoried at $230 per unit.

1. What is the normal spoilage rate?

7/25 = 28.00%

2. Prepare the journal entries to record the spoilage, assuming:

a. The spoilage is normal and related to a specific job.

Spoiled Goods Inventory 1,610

WIP, Job #10 1,610
To record normal spoilage specific
Job #10.

Note: Cost of a unit produced in Job #10 is

32 units @ $1,450 = $46,400

Less 7 X $230 = 1,610
$44,790 $44,790
Good units 25
Cost per good unit $1,791.60

b. The spoilage is normal and common to all jobs.

Spoiled Goods Inventory 1,610

Actual Manufacturing Overhead 8,540
WIP, Job #10 10,150
To record normal spoilage specific
to Job #10.

Note: Cost of a unit produced in Job #10 is

32 units @ $1,450 = $46,400

Less 7 X $1,450 = 10,150
$36,250
Good units 25
Cost per good unit $1,450

c. The spoilage is considered abnormal.

Spoiled Goods Inventory 1,610

Abnormal Production Loss 8,540
 WIP, Job #10 10,150
To record abnormal spoilage specific
Job #10.

Note: Cost of a unit produced in Job #10 is

32 units @ $1,450 = $46,400

Less 7 X $1,450 = 10,150
$36,250
Good units 25
Cost per good unit $1,450

Problem 18-36: Rework in job costing

Assume that the 7 spoiled units of Crystal Clear Machine Shop's Job #10 can be reworked for a total
cost of $1,700. A total cost of $10,150 associated with these units has already been assigned to
Job #10 before the rework. Prepare the journal entries for the rework, assuming:

a. The rework is related to a specific job.

WIP, Job #10 1,700

Various Accounts 1,700
To charge rework cost associated with
Job #10.

b. The rework is common to all jobs.

Actual Manufacturing Overhead Costs 1,700

Various Accounts 1,700
To record common rework costs.

c. The rework is considered abnormal.

Abnormal Rework Loss 1,700

Various Accounts 1,700
To record abnormal rework costs.

Problem 18-37: Scrap Sales recorded at time of sale or at time of production, journal entries

Assume that Job #10 of Crystal Clear Machine Shop generates normal scrap with a total sales value
of $650 (it is assumed that the scrap returned to the storeroom is sold quickly). Prepare the journal
entries for the recognition of scrap, assuming:

a. The value of scrap is immaterial and scrap is recognized at the time of sale.

Accounts Receivable (or Cash) 650

Scrap Revenues 650
To record immaterial scrap revenue
at the time of sale.
b. The value of scrap is material, is related to a specific job and is recognized at the time of sale.

Accounts Receivable (or Cash) 650

WIP, Job #10 650
To record material scrap sales
associated with Job #10 when the scrap
is sold.

c. The value of scrap is material, is common to all jobs and is recognized at the time of sale.

Accounts Receivable (or Cash) 650

Actual Manufacturing Overhead 650
To record material scrap sales
which are common to all jobs.

d. The value of scrap is material, scrap is recognized as inventory at the time of production and
is recorded at its net realizable value.

Scrap Inventory 650

WIP, Job #10 650
To record material scrap inventory
associated with Job #10 which has
a determinable and stable value.

Accounts Receivable (or Cash) 650

Scrap Inventory 650
To record sale of scrap inventory

Or

Scrap Inventory 650

Actual Manufacturing Overhead 650
To record material scrap inventory
common to all jobs which has
a determinable and stable value.

Accounts Receivable (or Cash) 650

Scrap Inventory 650
To record sale of scrap inventory
 Peter Cruz, the
t 2010. A total of
n, yielding 25
prior to the
$230 per unit.
ked for a total

al sales value
re the journal
Problem 18-35

Given Data: SM-5 RW-8 Total

Total Production Volume 1,000 500 1,500
Units requiring rework
Normal Rework (1) (50) 0 (50)
Abnormal Rework (2) (30) 0 (30)
Initial Good Units 920 500 1,420
Reworked Units 80 0 80
Total Units Accounted for 1,000 500 1,500

(1) Rework costs not specifically attributable to SM-5

(2) Rework which is not caused by inherent production process problems
but by implementation of the process.

Normal Mfg. Costs Before Rework SM-5 RW-8

Cost Component
Direct Materials $300 $400 (Assumed values)
Direct Manufacturing Labor 60 80
MOH Allocated 190 190 (MOH rate does not include any adjustment for rework)
Normal Costs $550 $670
Rework Units
Additional Cost Components
Direct Materials $60 $0
Direct Manufacturing Labor 45 0
MOH Allocated 75 0
Normal Rework Costs $180 $0

Part 1: Prepare the J/E to record the manufacturing costs for February.
Dr Cr $/Unit
W-I-P, Control, RW-8 Motors 335,000 670
Direct Materials, Control 200,000 400
Wages Payable 40,000 80
Applied Manufacturing Overhead 95,000 190
To record normal manufacturing costs associated with of RW-8.

W-I-P, Control, SM-5 Motors 550,000 550

Direct Materials, Control 300,000 300
Wages Payable 60,000 60
Applied Manufacturing Overhead 190,000 190
To record normal manufacturing costs associated with of SM-5
 Loss from Abnormal Rework: SM-5 5,400 180
Manufacturing Department Rework, Control (Normal Rework) 9,000 180
Direct Materials, Control 4,800 60
Wages Payable 3,600 45
Applied Manufacturing Overhead 6,000 75
To record rework costs associated with SM-5. Normal rework is not considered
to be product specific.

W-I-P, Control, SM-5 Motors 6,000 6

W-I-P, Control, RW-8 Motors 3,000 6
Manufacturing Department Rework, Control (Normal Rework) 9,000 6
To assign normal rework costs to good units produced at the rate of $6 per unit.
$9,000/(1,000+500) = $6

Part 2: What were the total rework costs charged to SM-5 and RW-8.

Abnormal
Normal Manufacturing Costs Before Rework SM-5 RW-8 Loss Total
Cost Component
Direct Materials $300,000 $200,000 $500,000
Direct Manufacturing Labor 60,000 40,000 100,000
MOH Allocated 190,000 95,000 285,000
Normal Costs $550,000 $335,000 $0 $885,000
Normal Rework Costs
W-I-P, Control, SM-5 Motors 6,000 6,000
W-I-P, Control, RW-8 Motors 3,000 3,000
Abnormal Rework Costs 5,400 5,400
Total $556,000 $338,000 $5,400 $899,400
Average cost per good unit assigned to inventory. $556 $676

Rework Units Abnormal

Additional Cost Components SM-5 RW-8 Loss Total
Direct Materials $60 $2,000 $1,000 $1,800 $4,800
Direct Manufacturing Labor 45 1,500 750 1,350 3,600
MOH Allocated 75 2,500 1,250 2,250 6,000
Normal Rework Costs $180 $6,000 $3,000 $5,400 $14,400
Normal Manufacturing Costs before rework. 550,000 335,000 0 885,000
Total Costs $556,000 $338,000 $5,400 $899,400
Average cost per good unit assigned to inventory. $556 $676
Note: Only $6,000 of the normal rework cost of $9,000 is assigned to SM-5. Also for management
control purposes the abnormal loss is linked to SM-5 but written off in the current period.

Final Proof:
Units Cost/Unit
Total Costs to Account For: SM-5 1,000 $550 $550,000
RM-8 500 670 335,000
Rework 80 180 14,400
$899,400

Total Cost Accounted for: SM-5 $556,000

RM-8 338,000
Loss from Abnormal Rework 5,400
$899,400