COST ACCOUNTING BY CARTER

THE COST OF QUALITY AND ACCOUNTING FOR PRODUCTION LOSSES

C 1. Scrap includes all of the following except:

A. the trimmings remaining after processing materials
B. defective materials that cannot be used or returned to the vendor
C. partially or fully completed units that are in some way defective
D. broken parts resulting from employee or machine failures
E. all of the above

A 2. When spoilage occurs because of some action taken by the customer, the
unrecoverable cost of the spoilage should be charged to:
A. Work in Process
B. Spoiled Goods Inventory
C. Factory Overhead Control
D. Applied Factory Overhead
E. none of the above

C 3. When spoilage occurs because of some internal failure, the unrecoverable cost should
be charged to:
A. Work in Process
B. Spoiled Goods Inventory
C. Factory Overhead Control
D. Applied Factory Overhead
E. none of the above

A 4. When rework occurs because of some action taken by the customer, the cost of the
rework should be charged to:
A. Work in Process
B. Spoiled Goods Inventory
C. Factory Overhead Control
D. Applied Factory Overhead
E. none of the above

C 5. When rework occurs because of some internal failure, the cost of the rework should
be charged to:
A. Work in Process
B. Spoiled Goods Inventory
C. Factory Overhead Control
D. Applied Factory Overhead
E. none of the above

C 6. Newman Company's Job 1865 for the manufacture of 2,200 coats was completed
during August at the unit costs presented below. Due to an internal failure in the
production process, 200 coats were found to be spoiled during final inspection that
were sold to a jobber for $6,000.

Direct materials .......................................................................................... $20

COST ACCOUNTING BY CARTER
THE COST OF QUALITY AND ACCOUNTING FOR PRODUCTION LOSSES
Direct labor ................................................................................................. 18
Factory overhead ........................................................................................ 18
........................................................................................................... $56

What would be the unit cost of good coats produced on Job 1865?
A. $57.00
B. $55.00
C. $56.00
D. $58.00
E. none of the above

SUPPORTING CALCULATION: $20 + $18 + $18 = $56

A 7. During March, Vaughan Company incurred the following costs on Job 009 for the
manufacture of 200 motors:

Original cost accumulation:

Direct materials ..................................................................................... $ 660
Direct labor ........................................................................................... 800
Factory overhead (150% of direct labor) .............................................. 1,200
$ 2,660

Direct costs of reworking 10 units:

Direct materials ..................................................................................... $100
Direct labor ........................................................................................... 160
............................................................................................................... $260

The rework costs were attributable to the exacting specifications of the customer.
What is the cost per finished unit of Job 009?
A. $15.80
B. $14.60
C. $14.00
D. $13.30
E. none of the above

SUPPORTING CALCULATION:

$2,660 + $260 + (150% x $160) = $3,160  200 = $15.80

C 8. Spoilage occurs as a result of an internal failure in a process cost system. Using

average costing, the number of equivalent units that production costs should be
charged to would be based upon:
A. spoiled units
B. units transferred out and spoiled units
COST ACCOUNTING BY CARTER
THE COST OF QUALITY AND ACCOUNTING FOR PRODUCTION LOSSES
C. units transferred out, spoiled units, and units in ending inventory
D. units transferred out and units in ending inventory
E. none of the above

D 9. Spoilage occurs as a result of normal production shrinkage in a process cost system.

Using average costing, the number of equivalent units that production costs should be
charged to would be based upon:
A. spoiled units
B. units transferred out and spoiled units
C. units transferred out, spoiled units, and units in ending inventory
D. units transferred out and units in ending inventory
E. none of the above

C 10. In a process cost system, the cost of spoilage due to an internal production failure
should be recorded as:
A. dr. Work in Process; cr. Finished Goods
B. dr. Work in Process; cr. Factory Overhead Control
C. dr. Factory Overhead Control; cr. Work in Process
D. dr. Materials; cr. Factory Overhead
E. dr. Finished Goods; cr. Work in Process