CHAPTER 18 SPOILAGE, REWORK, AND SCRAP 18-16 (5–10 min.) Normal and abnormal spoilage in units. 1.

Total spoiled units Normal spoilage in units, 5% × 132,000 Abnormal spoilage in units Abnormal spoilage, 5,400 × $10 Normal spoilage, 6,600 × $10 Potential savings, 12,000 × $10 12,000 6,600 5,400 $ 54,000 66,000 $120,000

2.

Regardless of the targeted normal spoilage, abnormal spoilage is non-recurring and avoidable. The targeted normal spoilage rate is subject to change. Many companies have reduced their spoilage to almost zero, which would realize all potential savings. Of course, zero spoilage usually means higher-quality products, more customer satisfaction, more employee satisfaction, and various beneficial effects on nonmanufacturing (for example, purchasing) costs of direct materials. 18-17 (20 min.) Weighted-average method, spoilage, equivalent units. Solution Exhibit 18-17 calculates equivalent units of work done to date for direct materials and conversion costs. SOLUTION EXHIBIT 18-17 Summarize Output in Physical Units and Compute Output in Equivalent Units; Weighted-Average Method of Process Costing with Spoilage, Gray Manufacturing Company for November 2009. (Step 1) Flow of Production Work in process, beginning (given) Started during current period To account for Good units completed and transferred out during current period: Normal spoilage* 100 × 100%; 100 × 100% Abnormal spoilage† 50 × 100%; 50 × 100% Work in process, ending‡ (given) 2,000 × 100%; 2,000 × 30% Accounted for Work done to date Physical Units 1,000 10,150a 11,150 9,000 100 50 50 2,000 11,150 2,000 11,150 600 9,750 50 9,000 100 9,000 100 (Step 2) Equivalent Units Direct Conversion Materials Costs

18-1

a

From below, 11,150 total units are accounted for. Therefore, units started during current period must be = 11,150 – 1,000 = 10,150. *Degree of completion of normal spoilage in this department: direct materials, 100%; conversion costs, 100%. † Degree of completion of abnormal spoilage in this department: direct materials, 100%; conversion costs, 100%. ‡ Degree of completion in this department: direct materials, 100%; conversion costs, 30%.

18-18 (20− min.) Weighted-average method, assigning costs (continuation of 18-17). 25 Solution Exhibit 18-18 summarizes total costs to account for, calculates the costs per equivalent unit for direct materials and conversion costs, and assigns total costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process. SOLUTION EXHIBIT 18-18 Summarize Total Costs to Account For, Compute Cost per Equivalent Unit, and Assign Total Costs to Units Completed, to Spoiled Units, and to Units in Ending Work in Process; Weighted-Average Method of Process Costing, Gray Manufacturing Company, November 2009.
Total Production Costs $ 2,533 39,930 $42,463 Direct Materials $ 1,423 12,180 $13,603 $13,603 ÷ 11,150 $ 1.22 Conversion Costs $ 1,110 27,750 $28,860 $28,860 ÷ 9,750 $ 2.96

(Step 3)

Work in process, beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit

(Step 4)

(Step 5)

Assignment of costs Good units completed and transferred out (9,000 units) Costs before adding normal spoilage Normal spoilage (100 units) (A) Total cost of good units completed & transf. out (B) Abnormal spoilage (50 units) (C) Work in process, ending (2,000 units) (A)+(B)+(C) Total costs accounted for

$37,620 418 38,038 209 4,216 $42,463

(9,000# × $1.22) + (9,000# × $2.96) (100# × $1.22) + (100# × $2.96) (50# × $1.22) + (50# × $2.96) (2,000# × $1.22) + (600# × $2.96)

$13,603

+

$28,860

#

Equivalent units of direct materials and conversion costs calculated in Step 2 in Solution Exhibit 18-17.

18-2

18-19 (15 min.) FIFO method, spoilage, equivalent units. Solution Exhibit 18-19 calculates equivalent units of work done in the current period for direct materials and conversion costs. SOLUTION EXHIBIT 18-19 Summarize Output in Physical Units and Compute Output in Equivalent Units; First-in, First-out (FIFO) Method of Process Costing with Spoilage, Gray Manufacturing Company for November 2009.
(Step 1) Physical Units 1,000 10,150a 11,150 (Step 2) Equivalent Units Direct Conversion Materials Costs

Flow of Production Work in process, beginning (given) Started during current period To account for Good units completed and transferred out during current period: From beginning work in process|| 1,000 0 500 1,000 × (100% − 100%); 1,000 × (100% − 50%) 8,000# Started and completed 8,000 8,000 8,000 × 100%; 8,000 × 100% 100 Normal spoilage* 100 100 100 × 100%; 100 × 100% † 50 Abnormal spoilage 50 50 50 × 100%; 50 × 100% ‡ 2,000 Work in process, ending 2,000 600 ____ 2,000 × 100%; 2,000 × 30% 11,150 Accounted for 10,150 9,250 Work done in current period only a From below, 11,150 total units are accounted for. Therefore, units started during current period must be 11,150 – 1,000 = 10,150. || Degree of completion in this department: direct materials, 100%; conversion costs, 50%. # 9,000 physical units completed and transferred out minus 1,000 physical units completed and transferred out from beginning work-in-process inventory. *Degree of completion of normal spoilage in this department: direct materials, 100%; conversion costs, 100%. † Degree of completion of abnormal spoilage in this department: direct materials, 100%; conversion costs, 100%. ‡ Degree of completion in this department: direct materials, 100%; conversion costs, 30%.

18-3

000a × $1. and to units in ending work in process. FIFO Method of Process Costing.600 420 (8.000 × $1.603 $12. Total Production Costs $ 2.000a × $3) 38. Compute Cost per Equivalent Unit.20 Conversion Costs $ 1. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (8.000 units) Costs added to beg.423 + (0a × $1.860 $27. and Assign Total Costs to Units Completed.110 (500a × 18-4 .053 (100a × $1. to Spoiled Units.000 units) (A)+(B)+(C) Total costs accounted for $ 2.533 39.860 a Equivalent units of direct materials and conversion costs calculated in Step 2 in Solution Exhibit 18-19.500 $3) 4.000 units) Work in process.603 + $28. Gray Manufacturing Company. assigning costs (continuation of 18-19).180 ÷ 10.110 27.750 $28. and assigns total costs to units completed and transferred out (including normal spoilage). beginning (given) Costs added in current period (given) Total costs to account for (Step 4) Costs added in current period Divided by equivalent units of work done in current period Cost per equivalent unit (Step 5) Assignment of costs: Good units completed and transferred out (9. ending (2.20) + (600a × $3) $13.750 ÷ 9.533 1.) 25 FIFO method. calculates the costs per equivalent unit for direct materials and conversion costs. Solution Exhibit 18-20 summarizes total costs to account for.18-20 (20− min. to abnormal spoilage.200 (50a × $1.463 (2.000 units) Normal spoilage (100 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (50 units) (C) Work in process.20) + $1. beginning (1. November 2009.180 $13.20) + (50a × $3) a $42.930 $42.20) + (8. and to Units in Ending Work in Process. $1.250 $ 3 (Step 3) Work in process.033 33.463 Direct Materials $ 1.20) + (100a × $3) 210 4.150 $ 1. SOLUTION EXHIBIT 18-20 Summarize Total Costs to Account For.423 12.

800 1. Degree of completion of abnormal spoilage in this department: direct materials. units + Units started . beginning (given) Started during current period (given) To account for Good units completed and tsfd. 18-5 . Appleton Company for August 2009. spoilage.18-21 (35 min.550 (Step 1) Flow of Production Work in process.1.0 00 10. 300 × 100%) Work in process. 1.800 = 1.000 = 900 units.000 11. c Degree of completion in this department: direct materials.000 .000 12. Weighted-Average Method of Process Costing with Spoilage.200 – 900 = 300 units.000 9.350 12.200. conversion costs. 1.800 × 75%) Accounted for Work done to date a Normal spoilage is 10% of good units transferred out: 10% × 9. Solution Exhibit 18-21A calculates equivalent units of work done in the current period for direct materials and conversion costs.800 × 100%.000 . b Total spoilage = Beg. endingc (given) (1. 100%. Abnormal spoilage = Total spoilage – Normal spoilage = 1. SOLUTION EXHIBIT 18-21A Summarize Output in Physical Units and Compute Output in Equivalent Units. 100%. 100%.000 9. 900 × 100%) Abnormal spoilageb (300 × 100%.800 ______ 1.000 9. 100%.9.Good units transferred out – Ending units = 2. 75%. out during current period: Normal spoilagea (900 × 100%. Degree of completion of normal spoilage in this department: direct materials. conversion costs. 100%.000 ______ ______ 12. (Step 2) Equivalent Units Physical Direct Conversion Units Materials Costs 2.000 900 900 900 300 300 300 1.000 + 10.) Weighted-average method. conversion costs.

000 Conversion Costs $ 10.25) + (9. beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divide by equivalent units of work done to date Cost per equivalent unit Assignment of costs Good units completed and transferred out (9.900 $103. 18-6 .2.994 $202. ending (1. Solution Exhibit 18-21B summarizes total costs to account for.550 $ 8.800 units): Total costs accounted for Direct Materials $17.800d × $8.25) + (1.732 5.900 ÷11. to Spoiled Units.000 + $103.9957) (300d × $8.000 $ 8. and Assign Total Costs to Units Completed.000 (Step 5) (A) (B) (C) (A) + (B) + (C) d $155. Weighted-Average Method of Process Costing.9957) (900d × $8. August 2009.000 d × $8.000d × $8.211 15.000 units) Costs before adding normal spoilage Normal spoilage (900 units) Total costs of good units completed and transferred out Abnormal spoilage (300 units) Work in process.300 $99.25) + (300d × $8. Appleton Company.9957) (1.900 (9.250 $99. Total Production Costs $ 28. using the weighted-average method.25) + (900d × $8. and to Units in Ending Work in Process.300 $202.900 Equivalent units of direct materials and conversion costs calculated in step 2 of Solution Exhibit 18-21A.9957 (Step 4) ÷ 12. and assigns total costs to units completed and transferred out (including normal spoilage).900 93. and to units in ending work in process.521 170.600 174.000 $103. to abnormal spoilage.174 26. calculates the costs per equivalent unit for direct materials and conversion costs.350d × $8.9957) $99. Compute Cost per Equivalent Unit.700 81.900 (Step 3) Work in process. SOLUTION EXHIBIT 18-21B Summarize Total Costs to Account For.

000 ÷ 10.500 good units = $1.450 Work-in-process control $10.450 cost for the 500 spoiled units is taken out of manufacturing costs and expensed in the period of the spoilage.18-22 (10 min. The total cost of the 500 spoiled units is: $20. The increase in the per-unit cost of goods sold as a result of the normal spoilage is: $10. A simple way to account for spoilage in process costing is to calculate the amount of direct material that was spoiled.10 Unit cost of goods sold for units remaining after the spoilage = $20.10 = $22.00.90 × 500 units = $10.000 units = $20. journal entries.000 units is: $209.) Standard costing method. The journal entry to record the abnormal spoilage incurred is: Loss from abnormal spoilage $10.90 + $1.90 per unit 2.450 ÷ 9. Spoilage represents the amount of resources that go into the process.450 3. The unit cost of making the 10.450 250 250 18-7 . 4. The $10. The journal entry to record the spoilage incurred in Aaron’s production process is: Manufacturing overhead control (normal spoilage) Work-in-process inventory (cost of spoiled sheet metal) 18-23 (15 min. 1.) Recognition of loss from spoilage. but do not result in finished product. spoilage.

‡ Degree of completion in this department: direct materials. Solution Exhibit 18-24. 2. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: Normal spoilage* 315 × 100%. Abnormal spoilage = Total spoilage − Normal spoilage = 600 − 315 = 285 units. Solution Exhibit 18-24. Degree of completion of normal spoilage in this department: direct materials.18-24 (25 min. Total spoilage = 600 + 2.) Weighted-average method. calculates the costs per equivalent unit for each cost category.100 = 315 units.550 3.550 – 2. calculates the equivalent units of work done to date for each cost category in September 2008.100 – 450 = 600 units. 100%. Degree of completion of abnormal spoilage in this department: direct materials. 315 × 100% Abnormal spoilage† 285 × 100%. 1. † 18-8 . and assigns total costs to units completed (including normal spoilage). 100%. conversion costs. SOLUTION EXHIBIT 18-24 Weighted-Average Method of Process Costing with Spoilage. Panel B.150 450 3. Chipcity.880 285 (Step 2) Equivalent Units Direct Conversion Materials Costs 2.100 315 2. September 2008. Panel A. 40%. and to units in ending work in process using the weightedaverage method. 450 × 40% Accounted for Work done to date Physical Units 600 2.100 315 285 285 450 3.100 315 *Normal spoilage is 15% of good units transferred out: 15% × 2. 285 × 100% Work in process. spoilage. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Flow of Production Work in process. ending‡ (given) 450 × 100%. 100%. summarizes total costs to account for.150 2. conversion costs. 100%. 100%. conversion costs.150 180 2. to abnormal spoilage.

3125 (Step 3) Work in process.100#× $85.SOLUTION EXHIBIT 18-24 PANEL B: Steps 3. beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit (Step 4) (Step 5) Assignment of costs Good units completed and transferred out (2. 18-9 .300 230.000 $245.700 Direct Materials $ 96. to Spoiled Units.700 $245.3125) (A)+(B)+(C) Total costs accounted for $908. ending (450 units) 110.700 $663.100#× $210.173 (315# × $210.000 ÷ 3. and 5— Summarize Total Costs to Account For.476) + (315# × $85.156 (2.476 Conversion Costs $ 15.400 $908. 4.700 ÷ 2.329 (285# × $210.400 $245. and Assign Total Costs to Units Completed.071 (450# × $210.300 797.880 $85.3125) (B) Abnormal spoilage (285 units) 84.700 # Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A.100 units) Costs before adding normal spoilage $621.150 $210.3125) (A) Total cost of good units completed and transferred out 714. and to Units in Ending Work in Process Total Production Costs $111.000 $663.000 $663.476) + (285# × $85. Compute Cost per Equivalent Unit.000 567.3125) Normal spoilage (315 units) 93.300 (C) Work-in-process.476) + (180# × $85.476) + (2.

2. September 2008. to abnormal spoilage. 600 × (100% −30%) 1.500 1. Degree of completion of normal spoilage in this department: direct materials. conversion costs.) FIFO method. calculates the costs per equivalent unit for each cost category. 100%. First-out (FIFO) Method of Process Costing with Spoilage. Panel B.500 × 100% 315 Normal spoilage* 315 315 315 × 100%. spoilage.500 × 100%. SOLUTION EXHIBIT 18-25 First-in. 100%.100 physical units completed and transferred out minus 600 physical units completed and transferred out from beginning work in process inventory.150 Good units completed and transferred out during current period: From beginning work in process|| 600 0 420 600 × (100% − 100%).18-25 (25 min.100 = 315 units. and assigns total costs to units completed and transferred out (including normal spoilage). *Normal spoilage is 15% of good units transferred out: 15% × 2. 1. 450 × 40% 3. Solution Exhibit 18-25. conversion costs.150 Accounted for 2.500 1. conversion costs. 285 × 100% 450 Work in process.550 2. 100%. # 18-10 . 40%.700 Work done in current period only || Degree of completion in this department: direct materials.500# Started and completed 1. and to units in ending work in process under the FIFO method. Panel A. calculates the equivalent units of work done in the current period for each cost category in September 2008. ending‡ 450 180 450 × 100%. summarizes the total Chip Department costs for September 2008. 100%. 30%. 100%. † Abnormal spoilage = Actual spoilage − Normal spoilage = 600 − 315 = 285 units. Degree of completion of abnormal spoilage in this department: direct materials.550 To account for 3. Solution Exhibit 18-25. Chipcity. 100%. 1. 315 × 100% 285 Abnormal spoilage† 285 285 285 × 100%. beginning (given) 600 Started during current period (given) 2. ‡ Degree of completion in this department: direct materials. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 2) (Step 1) Equivalent Units Physical Direct Conversion Flow of Production Units Materials Costs Work in process. conversion costs. 2.

529 96.SOLUTION EXHIBIT 18-25 PANEL B: Steps 3. and Assign Total Costs to Units Completed.700 $230.000 + $245.300 § (0 × $222.419 $96.000 $663.70 Divided by equivalent units of work done in current 0 Cost per equivalent unit (Step 5) Assignment of costs: Good units completed and transferred out (2.550 $222. beginning (600 units) Costs added to beg.333 (Step 3) (Step 4) period $111.700 Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A.353) + (315§ × $85.840 147.000 ÷ 2.353) + (420 × $85.000 + $15.353) + (285§ × $85.400 $245.40 0 Costs added in current period $908.500§× $85.333) $663.100 units) Work in process.590 87.333) (285§ × $222.700 $ 85. to Spoiled Units.400 ÷ 2.333) § (A) (B) (C) (1.691 115.500§ × $222. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (1.921 705. ending (450 units) Direct Materials $ 96.000 567. and to Units in Ending Work in Process Total Production Costs Work in process.353)+(1.500 units) Normal spoilage (315 units) Total costs of good units completed and transferred out Abnormal spoilage (285 units) Work in process.30 Costs added in current period (given) 0 Total costs to account for 797. beginning (given) $111. 18-11 .333) (450§ × $222.300 230.333) (315§ × $222. 4 and 5— Summarize Total Costs to Account For.700 (A)+(B)+(C) § Total costs accounted for $908.353 Conversion Costs $ 15.140 461.353) + (180§ × $85. Compute Cost per Equivalent Unit.300 35.000 $567.

Panel A.500 $846.700 × $75) $133. 18-12 . Panel A.000 $ 75 (Step 3) Work in process. § Equivalent units of direct materials and conversion costs calculated in Step 2 in Solution Exhibit 18-25. beginning has 600 equivalent units (600 physical units × 100%) of direct materials and 180 equivalent units (600 physical units × 30%) of conversion costs. SOLUTION EXHIBIT 18-26 Standard Costing Method of Process Costing with Spoilage.700 units). 4.000 $ 200 Conversion Costs (180 × $75) $216.000 Work in process. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (1. and to Units in Ending Work in Process Total Production Costs $133. to abnormal spoilage. (This computation is the same for FIFO and standard-costing.000 $ 275 Direct Materials (600 × $200) (2. and assigns these costs to units completed (including normal spoilage).500§ × $75) (315§ × $200) + (315§ × $75) (285§ × $200) + (450§ × $200) + (285§ × $75) (180§ × $75) $630.500 $846.125 78. to Spoiled Units.500 165.625 664. Chipcity. beginning (600 units)* Costs added to beg.500§ × $200) + (1. Compute Cost per Equivalent Unit.500 units) Normal spoilage (315 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (285 units) (C) Work in process.) Standard-costing method. Solution Exhibit 18-26 summarizes the total costs to account for.000 + $216.000 (600 × $200) (0§ × $200) + + (180 × $75) (420§ × $75) (1. The direct materials cost per equivalent unit of beginning work in process and of work done in September 2008 is the standard cost of $200 given in the problem. and Assign Total Costs to Units Completed.500 31. beginning* Costs added in current period at standard prices Costs to account for (Step 4) Standard costs per equivalent unit (given) (Step 5) Assignment of costs at standard costs: Good units completed and transferred out (2. The conversion cost per equivalent unit of beginning work in process and of work done in September 2008 is the standard cost of $75 given in the problem.550 × $200) $630.100 units) Work in process.000 412. September 2008. and to units in ending work in process using the standard costing method. spoilage.550 units) and conversion costs (2. and 5—Summarize Total Costs to Account For.) 2.500 86. Steps 3. shows the computation of the equivalent units of work done in September 2008 for direct materials (2.375 103. ending (450 units) (A)+(B)+(C) Total costs accounted for * (2. Solution Exhibit 18-25. 1.18-26 (30 min.500 712.

not the particular attributes of this specific job. a. Wages Payable Control.600 ÷ 2. Cash Manufacturing Department Overhead Control Work-in-Process Control 400 800 1.200 Remaining cases cost = $6.00.08 b. charged as part of manufacturing overhead and the manufacturing overhead cost of $1 per case already includes a provision for this normal rework. Manufacturing Department Overhead Control Materials Control. therefore.300 = $6. These costs are.00 × 200) – $200 = $1.) Spoilage and job costing.500) – $400] = $14.000 1. 18-13 . a.200 400 400 The unit cost of a good case remains at $6.500) + $200] = $15. normal spoilage is due to the production process. Work-in-Process Control Materials Control.18-27 (20–30 min.200 The unit cost of a good case is $15. c.00 × 2. These costs are. normal rework is due to the production process. Manufacturing Overhead Allocated 200 200 3.200 ÷ 2. 1.00 per case. The unit costs in 2a and 2b are different because in 2a the normal spoilage cost is charged as a cost of the job which has exacting job specifications. therefore. charged as part of manufacturing overhead and the manufacturing overhead cost of $1 per case already includes a provision for normal spoilage. 2. Manufacturing Overhead Allocated The unit cost of a good case = $6. Wages Payable Control. Cash Work-in-Process Control The cost of the remaining good cases = [($6. In 2b however. The cost of these cases is unaffected by the loss from abnormal spoilage. In 3b however. 200 200 The unit costs in 3a and 3b are different because in 3a the normal rework cost is charged as a cost of the job which has exacting job specifications.000 200 1. Cash Loss from Abnormal Spoilage Work-in-Process Control Loss = ($6. not the particular attributes of this specific job.500 = $6.3478 b.00 × 2. The cost of the good cases = [($6.00 per case c.600 The unit cost of a good case now becomes $14.

and that supplier is now bankrupt. To charge the costs of the rework to manufacturing overhead as normal rework. and d. 18-14 . b. the costs of any extra negotiations to obtain the replacement tumbler units. c.) Reworked units. the labor and other conversion costs spent on substituting the new tumbler units. The $50 tumbler cost is the cost of the actual tumblers included in the washing machines. The $44 tumbler units from the first supplier were eventually never used in any washing machine. costs of rework.18-28 (15 min. 2. any higher price the existing supplier may have charged to do a rush order for the replacement tumbler units. The total costs of rework due to the defective tumbler units include the following: a. b. This approach would highlight to White Goods the costs of the supplier problem. 3. ordering costs for the replacement tumbler units. 1. The two alternative approaches to account for the materials costs of reworked units are: a. To charge the costs of rework to the current period as a separate expense item as abnormal rework. The units have now been disposed of at zero disposal value.

Regard scrap sales as a separate line item of revenues (the method generally used when the dollar amount of scrap is immaterial): Cash or Accounts Receivable Sale of Scrap To recognize revenue from sale of scrap.000 3.000 4. A memo posting is also made to the specific job record. When the scrap is reused as direct material on a subsequent job.18-29 (25 min. the journal entry is: Work-in-Process Control 4. 4. Scrap common to various jobs and accounted for at the time of its sale can be accounted for in two ways: a.000 To record value of scrap returned to storeroom. 490 490 2. Regard scrap sales as offsets against manufacturing overhead (the method generally used when the dollar amount of scrap is material): Cash or Accounts Receivable Manufacturing Department Overhead Control To record cash raised from sale of scrap.000 Materials Control 4. 4. job costing. Journal entry to record scrap generated by a specific job and accounted for at the time scrap is sold is: Cash or Accounts Receivable Work-in-Process Control To recognize asset from sale of scrap.000 b.000 To record reuse of scrap on a job. Journal entry to record scrap common to various jobs at the time scrap is returned to storeroom: Materials Control 4. 18-15 . Explanations of journal entries are provided here but are not required.) Scrap. 1.000 Manufacturing Department Overhead Control 4.000 4.

500 25.) Weighted-average method.500 – 4. SOLUTION EXHIBIT 18-30 Weighted-Average Method of Process Costing with Spoilage. and to units in ending work in process using the weightedaverage method.000 18. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Flow of Production Work in process. ‡ Degree of completion in this department: direct materials.500 1. to abnormal spoilage. conversion costs.500 1. 18-16 . Abnormal spoilage = 2.850 × 100%.000 = 2.000 × 25% Accounted for Work done to date Physical Units 2. 100%.500 = 1.500 1. 650 × 100% Work in process.500 22.500 – 1.850 = 650 units. spoilage.850 650 4.850 650 4. and assigns total costs to units completed (including normal spoilage). beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: Normal spoilage* 1. 1.18-30 (30 min. ending‡ (given) 4.850 units. 100%.000 22.000 18.000 *Normal spoilage is 10% of good units transferred out: 10% × 18.850 × 100% Abnormal spoilage† 650 × 100%. conversion costs. Cleaning Department of the Boston Company for May.000 25.850 650 1. conversion costs.000 25. 25%. 100%. Degree of completion of abnormal spoilage in this department: direct materials.500 + 22. 100%. Solution Exhibit 18-30 summarizes total costs to account for.500 units. Degree of completion of normal spoilage in this department: direct materials. calculates the equivalent units of work done to date for each cost category.500 – 18.000 (Step 2) Equivalent Units Direct Conversion Materials Costs 18. 4.000 × 100%. † Total spoilage = 2. 100%.

000 (18.700 1.500 $47.000 20.300 5.850# × $1) + (650# × $1) + (4.000 $22.000 ÷ 22.700 40. beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit (Step 4) (Step 5) Assignment of costs Good units completed and transferred out (18.000 $22.SOLUTION EXHIBIT 18-30 PANEL B: Steps 3. and to Units in Ending Work in Process Total Production Costs $ 4.500 units) Costs before adding normal spoilage Normal spoilage (1.000 # Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A above. to Spoiled Units. and 5— Summarize Total Costs to Account For.000 ÷ 25.500# × $1) (1. and Assign Total Costs to Units Completed. 4. ending (4.500 $25.000 $ 1 (Step 3) Work in process.500 22.000 $ 1 Conversion Costs $ 2.000 $47.000 $25.850 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (650 units) (C) Work in process.500# × $1) + (1. Compute Cost per Equivalent Unit.500 42.850# × $1) (650# × $1) (1. 18-17 .000# × $1) + $22.000 3.000 units) (A)+(B)+(C) Total costs accounted for $37.000# × $1) + $25.000 Direct Materials $ 2.000 (18.

500 physical units completed and transferred out from beginning work-in-process inventory. ending‡ 4.000 = 2.000 1. 100%. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: From beginning work in process|| 2. 16.500 22.500 units Abnormal spoilage = 2.500 × (100% − 100%). 2. 4.850 1.850% × 100% Abnormal spoilage† 650 × 100%. Degree of completion of normal spoilage in this department: direct materials. 650 × 100% Work in process. conversion costs. 1.000# 16.500 + 22. 100%. *Normal spoilage is 10% of good units transferred out: 10% × 18. to abnormal spoilage. 100%. 100%.000 × 100%. 80%.000 500 (Step 2) Equivalent Units Direct Conversion Materials Costs Flow of Production Work in process.000 2.850 × 100%. and assigns total costs to units completed and transferred out (including normal spoilage).500 physical units completed and transferred out minus 2. For the Cleaning Department.500 0 16. 18.000 × 100%.000 _____ 22.000 _____ 25.000 4.500 – 18. 100%. SOLUTION EXHIBIT 18-31 First-in. and to units in ending work in process under the FIFO method. Cleaning Department of the Boston Company for May. calculates the equivalent units of work done in the current period for direct materials and conversion costs.500 – 1.500 × (100% − 80%) Started and completed 16. # 18-18 . PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Physical Units 2.) FIFO method.18-31 (25 min.500 = 1. ‡ Degree of completion in this department: direct materials. Solution Exhibit 18-31 summarizes the total costs for May.000 × 25% Accounted for Work done in current period only || Degree of completion in this department: direct materials.000 1. 100%. † Total spoilage = 2. spoilage.850 units. 25%.000 _____ 20.500 25.500 650 1. conversion costs. First-out (FIFO) Method of Process Costing with Spoilage. conversion costs. Degree of completion of abnormal spoilage in this department: direct materials.000 × 100% Normal spoilage* 1.850 16.850 650 650 4.850 = 650 units.500 – 4. conversion costs.

500 ÷ 22.000 + (500§ × $1) (16.000 $20.000 $22.850§ × $1) (650§ × $1) + (650§ × $1) (4.500 $25.000 ÷ 20. beginning (2.500 22.000 Direct Materials $ 2. Compute Cost per Equivalent Unit.500 $ 1 Conversion Costs $ 2.000 units) Normal spoilage (1.000§ × $1) + (1. beginning (given) Costs added in current period (given) Total costs to account for Costs added in current period Divided by equivalent units of work done in current period Cost per equivalent unit (Step 4) Assignment of costs: Good units completed and transferred out (18. and Assign Total Costs to Units Completed.000 § Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A.500 units) Work in process. ending (4.000 $2. 18-19 .000§ × $1) (1.700 40. 4. and 5— Summarize Total Costs to Account For.000 32.500 500 5.000§ × $1) + (16.500 42.500 units) Costs added to beg.000 3. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (16. to Spoiled Units.850§ × $1) + (1.500 $47.SOLUTION EXHIBIT 18-31 PANEL B: Steps 3.500 (0§ × $1) + $2. and to Units in Ending Work in Process Total Production Costs $ 4.850 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (650 units) (C) Work in process.000 $47.300 5.700 1.000 $22.000 20.000 units) (A)+(B)+(C) Total costs accounted for (Step 5) $ 4.000§ × $1) $25.000 + $22.000 $ 1 (Step 3) Work in process.

000 0 ______ 16.000 10. conversion costs. 18-20 . Degree of completion of normal spoilage in this department: transferred-in costs. 100%. Packaging Department (continuation of 18-30).000 units.000 = 1. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: Normal spoilage* 750 × 100%. † Total spoilage =7. 100%. 250 × 100%. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Flow of Production Work in process.) Weighted-average method.000× 0%. calculates the equivalent units of work done to date for each cost category. and assigns costs to units completed (including normal spoilage). to abnormal spoilage.000 – 10. 750 × 100%.000 15.500 – 15.000 750 *Normal spoilage is 5% of good units transferred out: 5% × 15. and to units in ending work in process using the weighted-average method.500 18.000 26.000 × 100%.000 750 250 250 10.500 + 18. 100%. 100%. Solution Exhibit 18-32 summarizes total costs to account for.000 26.000 750 15. For the Packaging Department. direct materials. 0%. 10.000× 25% Accounted for Work done to date Physical Units 7.000 750 15. 750 × 100% Abnormal spoilage† 250 × 100%. ‡ Degree of completion in this department: transferred-in costs.000 – 750 = 250 units.500 26. Abnormal spoilage = 1. Degree of completion of abnormal spoilage in this department: transferred-in costs. 10. 250 × 100% Work in process. 100%. conversion costs. direct materials.000 2. Packaging Department of the Boston Company for May.500 _____ 18.18-32 (35 min. ending‡ (given) 10.000 = 750 units. SOLUTION EXHIBIT 18-32 Weighted-Average Method of Process Costing with Spoilage. direct materials.500 250 250 (Step 2) Equivalent Units TransferredDirect Conversion in Costs Materials Costs 15. 25%. 100%. 100%. conversion costs.

10)+(2.10 + $1) 750# × ($2.000 $ 0.825 56.500 $ 1 (Step 4) (Step 5) Assignment of costs Good units completed and transferred out (15.825 ÷ 26.SOLUTION EXHIBIT 18-32 PANEL B: Steps 3. 4.500 *Total costs of good units completed and transferred out in Panel B (Step 5) of Solution Exhibit 18-30.10 + $1) 250# × ($2.925 $16.000 $2.284 2.1856 Direct Materials $ 0 1.1856 + $0.1856)+(0# × $0.825 + $1.464 51.10 Conversion Costs $ 6.000# × ($2.356 $76.1856 + $0.700* $56.10 + $1) (10.250 54.375 $18. beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit $22.1856 + $0. Compute Cost per Equivalent Unit.125 12.500# × $1) $56. and 5— Summarize Total Costs to Account For.000 units) (A)+(B)+(C)Total costs accounted for $49. and to Units in Ending Work in Process Total Production Transferred-in Costs costs (Step 3) Work in process.600 ÷ 16.600 $1.675 $76.925 15. # Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A above.125 40.600 1. ending (10.748 821 24.500 ÷ 18. and Assign Total Costs to Units Completed.000 units) Costs before adding normal spoilage Normal spoilage (750 units) (A) Total cost of good units completed and transferred out (B) Abnormal spoilage (250 units) (C) Work in process.000# × $2. to Spoiled Units. 18-21 .600 + $18.500 18.

000 – 750 = 250 units.000 = 750 units. SOLUTION EXHIBIT 18-33 First-in. direct materials. conversion costs. Packaging Department (continuation of 18-31). 100%. 100%. 250 × 100% Work in process. and to units in ending work-inprocess under the FIFO method.500 × 100%. 10.500 250 250 750 750 7.500 (Step 2) Equivalent Units TransferredDirect Conversion in Costs Materials Costs Flow of Production Work in process. 7. 100%.500 7. 15. Abnormal spoilage = 1.500 0 16. 10. Degree of completion of abnormal spoilage in this department: transferred-in costs. † Total spoilage = 7. 25%. 750 × 100% Abnormal spoilage† 250 × 100%.) FIFO method. conversion costs.500 7. direct materials. direct materials. 100%. Degree of completion of normal spoilage in this department: transferred-in costs. 750% × 100%.500 × (100% − 0%). Solution Exhibit 18-33 summarizes the total Packaging Department costs for May. direct materials.500 × 100% Normal spoilage* 750 × 100%. 100%. Packaging Department of the Boston Company for May.500 12.500 0 7. shows the equivalent units of work done in the Packaging Department in the current period for transferred-in costs. and assigns total costs to units completed and transferred out (including normal spoilage).500 1.000 – 10.500 × (100% − 80%) Started and completed 7.500 26. ending‡ 10. to abnormal spoilage.000 = 1.000 physical units completed and transferred out minus 7.500 × 100%. conversion costs. ‡ Degree of completion in this department: transferred-in costs. 250 × 100%.000 18. 100%. 80%. conversion costs. 0%. and conversion costs. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Physical Units 7. 7.000 × 25% Accounted for Work done in current period only || # Degree of completion in this department: transferred-in costs.500 physical units completed and transferred out from beginning work-in-process inventory.500 + 18.000 units. 7. direct materials. 18-22 .500 – 15. 100%. *Normal spoilage is 5% of good units transferred out: 5% × 15.500# 7.500 750 750 250 250 10.000 7. 7.000 2.500 18.000 × 100%.000 × 0%. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: From beginning work in process|| 7. First-out (FIFO) Method of Process Costing with Spoilage.18-33 (25 min.000 10.000 26. 100%. 0%.500 × (100% − 100%).

125 12.600 Conversion Costs $ 6.000 × $2. work in process in current period Total from beginning inventory before normal spoilage Started and completed before normal spoilage (7.SOLUTION EXHIBIT 18-33 PANEL B: Steps 3.500 $ 2.700* $56.10 (Step 5) Assignment of costs: Good units completed and transferred out (15.825 Direct Materials $ 0 1.600 ÷16. beginning (7.20 + $0.235 24.99) $56. to Spoiled Units.500 § *Total costs of good units completed and transferred out in Step 5 Panel B of Solution Exhibit 18-31.20 $1.467 51.20)+(0§× $0.99) 250§ × ($2. 18-23 .500§ × ($2.20 + $0.000 units) Work in process.99) (10.475 $76.675 $76.500§× $0.10 + $0.000 $ 0.485 24.125 + $0 + $6.600 $1. beginning (given) Costs added in current period (given) Total costs to account for Costs added in current period Divided by equivalent units of work done in current period Cost per equivalent unit $22.250 54. § Equivalent units of direct materials and conversion costs calculated in Step 2 in Panel A.125 40.925 $16. Compute Cost per Equivalent Unit.10)+(1.99) 7.600 + $18.375 $18.99 (Step 4) $40.10)+(2.500 units) Normal spoilage (750 units) (A) Total costs of good units completed and transferred out (B) Abnormal spoilage (250 units) (C) Work in process.627 823 24.700 ÷ 18.375 ÷ 12.99) 750§ × ($2.250 2.500§× 0.125 (0× $2.000 units) (A)+(B)+(C) Total costs accounted for $22.925 Transferredin Costs $16. and Assign Total Costs to Units Completed. and to Units in Ending Work in Process Total Production Costs (Step 3) Work in process.675 2. and 5— Summarize Total Costs to Account For.10 + $0. ending (10.500 units) Costs added to beg.20 + $0.500 $12.825 + $1.500 $ 0.10 + $0.500§× $0.20) + (7. 4.

300 = $743.25 or $724.132.151 18-24 . a. Then.300) or the cost of the good output before the "1% normal spoilage" is added. Accounts Receivable or Cash Work-in-Process Control 800 1. The clause does not specify whether the 1% calculation is to be based on the input cost ($40.) Job-costing spoilage and scrap.995 2.600 – 600 = 11. 25 1.132) If the outputs are used to determine the 1%: $40.875) b.995 1. remove the salvageable material. $800 salvage value plus $332 = $1.425 × 1% = $724. The journal entry would be: Materials Control Manufacturing Overhead Control Work-in-Process Control 800 351 1.000 $72.400 + $22. or $1.18-34 (20− min.300 – 300 = $74. and charge manufacturing overhead would be: Materials Control Manufacturing Overhead Control Work-in-Process Control ($1.075 1.600 + $11. Materials Control Manufacturing Overhead Control Work-in-Process Control (975 + 600 + 300 = 1.400 + $22. If the inputs are used to determine the 1%: $40.132 Then.600 + $11.075 spoilage minus $743 = $332 spoilage cost that is taken out of the job.875 1.300 1% of $74. b. rounded.300 = $74.300 $39.000 11.425 22. a. the entry to leave the $743 "normal spoilage" cost on the job. $72.875 minus $743 = $1.425 800 332 1.400 – $975 = 22.

000 5.800 1.000) + (5 × $800) = $39.18-35 (15 min. 2.800 1.000 Note: The costs incurred on the bad units (5 × $1. 18-36 (10 min. journal entry (continuation of 18-35) a) Journal entry for rework related to a specific job: Work-in-Process Control (Job #10) Various Accounts (To charge rework costs to the job) b) Journal entry for rework common to all jobs: Manufacturing Overhead Control (rework costs) Various Accounts c) Journal entry for abnormal rework: Loss from Abnormal Rework Various Accounts 1. Normal spoilage rate= Units of normal spoilage ÷ Total good units completed = 5 ÷ 35 = 14. a) Journal entry for spoilage related to a specific job: Materials Control (spoiled goods at current disposal value) 5 × $200 Work-in-Process Control (Job #10) 1.800 1.800 1.) Rework in job costing.000 4.000 Note: If the spoilage is abnormal.) Spoilage in job costing 1.000 Note: In developing the predetermined O/H rate. The cost of the 35 good units is (35 × 1. the net loss is highlighted and always charged to an abnormal loss account. c) Journal entry for abnormal spoilage: Materials Control (spoiled goods at current disposal value) 5 × $200 Loss from Abnormal Spoilage 5 × $800 Work-in-Process Control (job #10) 1.000 4.3%.800 1.000 b) Journal entry for spoilage common to all jobs: Materials Control (spoiled goods at current disposal value) 5 × $200 Manufacturing Overhead Control (normal spoilage) Work-in-Process Control (Job #10) 1.000 5. the budgeted manufacturing overhead would include expected normal spoilage costs.000 1.000) are already part of the balance in WIP.800 18-25 .

because 113.000 120.000 ending inventory = 113.000 beginning inventory +120. beginning (20%)* Started during March To account for Good units completed and transferred out Normal spoilage Abnormal spoilage (10. journal entries (continuation of 18-35) a) Journal entry for recognizing immaterial scrap at time of sale: Cash or Accounts Receivable 300 Scrap Revenues 300 (To record other revenue sale of scrap) b) Journal entry for recognizing material scrap related to a specific job at time of sale: Cash or Accounts Receivable 300 Work-in-Process Control (Job #10) 300 c) Journal entry for recognizing material scrap common to all jobs at time of sale: Cash or Accounts Receivable 300 Manufacturing Overhead Control 300 d) Journal entry for recognizing material scrap as inventory at time of production and recording at net realizable value: Materials Control 300 Work-in-Process Control (Job #10) 300 Cash or Accounts Receivable Materials Control (When later sold) 300 300 18-38 (20− min.) 25 Physical units.000 – normal spoilage) Work in process.000 Work in process.000 = 6.000a 6. ending (70%)* Accounted for 14. c 6% × (134.440.000 –10.000a 7.440c 2. d 6% × 113.780.000 units – 10.) Scrap at time of sale or at time of production.220 11. beginning work-in-process inventory is excluded because it was already 20% complete at March 1 and past the inspection point.000 ) = 6% × 124.600.000 113.000 113. b 6% × (120.000 units are fully completed and inspected during March.000 = 7.000 = 6.000.18-37 (10 min.000 134.000 134.000 Inspection at 100% 14. inspection at various stages of completion (chapter appendix).400 11.560 11.000 134.600b 3.000 113. Inspection at 15% Inspection at 40% 14. 18-26 .000 units spoiled) = 6% × 110.000 120.000 120.000 134.000 *Degree of completion for conversion costs of the forging process at the dates of the work-in-process inventories a 14. because all units passed the 40% completion inspection point in March.000 units started – 10.000 134.780d 3.000a 6.000 spoiled – 11.000 134.

Solution Exhibit 18-39. but not for beginning work in process. Panel A. which is 25% complete. Direct materials are added only later when production is 90% complete. The 3. of the 100. The cost of ending work in process includes the assignment of normal spoilage costs since these units have passed the point of inspection. and assigns costs to units completed (including normal spoilage). inspection at 80% completion (chapter 35 appendix).687 84.500 must have been spoiled in May [100.18-39 (25− min. and to units in ending work in process using the weighted-average method.675 $3.000 SOLUTION EXHIBIT 18-39 Weighted-Average Method of Process Costing with Spoilage. Solution Exhibit 18-39.750).10 × (62. summarizes total costs to account for.000)].750 [0. Normal spoilage is 8. The computation and allocation of spoilage is the most difficult part of this problem. which is 95% complete. We comment on several points in this calculation: • • • Ending work in process includes an element of normal spoilage since all the ending WIP have passed the point of inspection––inspection occurs when production is 80% complete.000 – (62. Panel B. therefore.750 remainder is abnormal spoilage (12. to abnormal spoilage.000 ending inventory)].346. The reason is that direct materials are added when production is 90% complete. the beginning work in process does not. calculates the equivalent units of work done for each cost category.349. 12.500 + 25.500 completed + 25. The ending work in process.500 – 8. 18-27 . computes the costs per equivalent unit for each cost category. Spoilage includes no direct materials units because spoiled units are detected and removed from the finishing activity when inspection occurs at the time production is 80% complete.) Weighted-average method.500 started).638 917.000 units to account for (12. The units in the ending inventory have passed inspection. contains direct materials units. while the units in ending WIP are 95% complete.500 beginning + 87. The costs assigned to each cost category are as follows: Cost of good units completed and transferred out (including normal spoilage costs on good units) Abnormal spoilage Cost of ending work in process (including normal spoilage costs on ending work in process) Total costs assigned and accounted for $2. Direct materials units are included for ending work in process. Therefore.

ending‡ (given) 25.750 × 80% Accounted for Work done to date Physical Units 12. 25. **Normal spoilage is 10% of the good units in ending WIP that have passed the inspection point. 18-28 . 80%.500 100.500 6. Degree of completion of normal spoilage in this department: transferred-in costs.000 2. direct materials. conversion costs. conversion costs.000 100.500 × 100%.000 × 95% Normal spoilage on ending WIP** 2.000 × 100%.000 62.750 100. 95%.000 23.500 6. 100%. 0%. 25. conversion costs.500 × 80% Abnormal spoilage† 3. conversion costs.500 0 25.Finishing Department of the Kim Company for August.000 87.000 × 100%. 100%.500 87. 0%.750 = 3.250 0 3. 10% × 25.500 3. 80%. Degree of completion of abnormal spoilage in this department: transferred-in costs. 0%.000 62.750 × 100%.500 units.750 *Normal spoilage is 10% of good units that pass inspection: 10% × 62.500 2. ‡ Degree of completion in this department: transferred-in costs. † Abnormal spoilage = Actual spoilage −Normal spoilage = 12. 100%.500 5. beginning (given) Started during current period (given) To account for Good units completed and transferred out during current period: Normal spoilage on good units* 6. 100%. 6.750 units.250 units. direct materials.500 −8. 6. 2. 3.500 × 0%.000 (Step 2) Equivalent Units TransferredDirect Conversion in Costs Materials Costs 62.000 = 2.250 25.750 × 0%.000 62. direct materials.750 3.500 96. 2.500 = 6. Degree of completion of normal spoilage in this department: transferred-in costs.250 × 100%.250 × 0%.250 25. 3. direct materials. 100%. PANEL A: Steps 1 and 2—Summarize Output in Physical Units and Compute Output in Equivalent Units (Step 1) Flow of Production Work in process.250 × 80% Work in process. 80%.000 0 2.

205.375 $913.250 units) 141.500# × $9.500 units) Costs before adding normal spoilage $2.000 # Equivalent units of transferred-in costs.875 $3.000 + $819.80) (25.688 (B) Abnormal spoilage (3.250 × $9.000 62.617.000 $913.349.80) $913. ending (25.000 ÷ 87.SOLUTION EXHIBIT 18-39 PANEL B: Steps 3.000 ÷ 96.36) + (23.80) (6.349.000 $819.625 Normal spoilage (6.36 $ Conversion Costs 52. and to Units in Ending Work in Process Total Production TransferredCosts in Costs (Step 3) Work in process.000# × $16.750 units) 84.13) + (0# × $9.425 (C) Total costs of ending WIP 917.500 $ 9.000 $ 9.000 $103.000# × $16.13) + (25.500 1.617. and 5— Summarize Total Costs to Account For.36) + (2. direct materials.625 809. 4.638 Work in process.000# × $9. to Spoiled Units.675 (A)+(B)+(C) Total costs accounted for $3. 18-29 .36 + $16. and conversion costs calculated in Step 2 in Panel A. beginning (given) Costs added in current period (given) Total costs to account for Costs incurred to date Divided by equivalent units of work done to date Cost per equivalent unit $ 156.617.000 units) WIP ending.000 $1.000 $819.80) (3.250 $ 16.80 (Step 4) (Step 5) Assignment of costs Good units completed and transferred out (62.36) + (3.192.36) + (5.13) + (0# × $9.13) + # (0# × $9.063 (A) Total costs of good units completed and transferred out 2.750# × $9.13 Direct Materials $ − 819.000# × $9.564. before normal spoilage 861.346. and Assign Total Costs to Units Completed.000# × $16.125 3.750# × $16.500 $1.500# × ($9.000 ÷ 100. Compute Cost per Equivalent Unit.13 + $9.250 Normal spoilage on ending WIP 56.000 + $1.80) (2.

Only $1. Work-in-Process Control (CS1 chips) ($110 × 80) Materials Control ($60 × 80) Wages Payable ($12 × 80) Manufacturing Overhead Allocated ($38 × 80) Total costs assigned to 80 spoiled units of CS1 chips before considering rework costs.18-40 (30 min. but not attributable specifically to the CS1 chip batches or jobs. 1. 18-30 . Abnormal rework costs of $1.200 of the normal rework costs are allocated to CS1 even though the normal rework costs of the 50 CS1 calculators reworked equal $1. The reason is that the normal rework costs are not specifically attributable to CS1.800 would be charged to CS1.280 8.080 are linked to CS1 in the management control system even though for financial reporting purposes the abnormal rework costs are written off to the income statement. Work-in-Process Control (CS1 chips) Work-in-Process Control (CS2 chips) Manufacturing Department Overhead Allocated (rework) (Allocating manufacturing department rework costs to CS1 and CS2 in the proportion 1. rework.200 600 1. b.800 4.800. but the rework was not caused by the specific requirements of CS1.800 600 450 750 1.200 1.800 We emphasize two points: a.) Job costing.080 $2. Total rework costs for CS1 chips in August 2008 are as follows: Normal rework costs allocated to CS1 Abnormal rework costs for CS1 Total rework costs $1.080 360 270 450 1. Manufacturing Department Overhead Control (rework) Materials Control ($12 × 50) Wages Payable ($9 × 50) Manufacturing Overhead Allocated ($15 × 50) Normal rework on 50 units. If it were. then all $1.) 2.000:500 since each calculator requires the same number of machine-hours. Loss from Abnormal Rework ($36 × 30) Materials Control ($12 × 30) Wages Payable ($9 × 30) Manufacturing Overhead Allocated ($15 × 30) Total costs of abnormal rework on 30 units (Abnormal rework = Actual rework – Normal rework = 80 – 50 = 30 units) of CS1 chips.800 960 3. For example.040 1. the machines happened to malfunction when CS1 was being made.

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