When is a company justified in inventorying scrap?
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All of the following are accurate regarding the treatment of normal or abnormal spoilage by a firm with the exception of: a. Abnormal spoilage is excluded in the standard cost of a manufactured product. b. Normal spoilage is capitalized as part of inventory cost. c. Abnormal spoilage has no financial statement impact. d. Normal and abnormal spoilage units affect the equivalent units of production.
The Russell 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 480 dollars quickly after it is produced. Prepare the journal entry. 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 4,500 dollars is sold. Prepare two alternative journal entries that could be used to account for the sale of scrap. 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.
Jellyfish Machine Shop is a manufacturer of motorized carts for vacation resorts. Patrick Cullin, the plant manager of Jellyfish, obtains the following information for Job #10 in August 2017\. A total of 46 units were started, and 6 spoiled units were detected and rejected at final inspection, yielding 40 good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection point are 1,100 dollars per unit. The current disposal price of the spoiled units is 235 dollars per unit. When the spoilage is detected, the spoiled goods are inventoried at 235 dollars per unit. 1\. What is the normal spoilage rate? 2\. Prepare the journal entries to record the normal spoilage, assuming the following: a. The spoilage is related to a specific job. b. The spoilage is common to all jobs. c. The spoilage is considered to be abnormal spoilage.
In the shipping department of World Class Steaks, conversion costs are added evenly during the process, and direct materials are added at the end of the process. Spoiled units are detected upon inspection at the end of the process and are disposed of at zero net disposal value. All completed work is transferred to the next department. The transferred-in costs for May equal the total cost of good units completed and transferred out in May from the prep department, which were calculated in Problem \(18-35\) using the weighted- average method of process costing. Summary data for May follow. For the shipping department, use the weighted-average method to summarize the total costs to account for and assign those costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process.
"Normal spoilage is planned spoilage." Discuss.
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