Chapter 18 cost Flashcards

17) The unit costs of normal and abnormal spoilage are the same when the two are detected at the same inspection point. 31) The first step in the five-step procedure for process costing with spoilage is to compute the output in terms of equivalent units. 19) Normal spoilage rates are computed by dividing units of normal spoilage by total good units completed, NOT total actual units started in production. Which of the statements below is not correct? Normal spoilage is spoilage that occurs under efficient operating conditions.

The amounts that appear in the cost pools are from Exhibit 5-5. The FIFO unit costs are based on the $861,520 cost added (The calculations are the same as those in Exhibit 5-8). The previous month’s ending inventory becomes the current month’s beginning inventory.

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How Normal Spoilage Works

When FIFO is used, the costs that were charged to the current month’s beginning inventory at the end of the previous month are abnormal spoilage is considered what kind of cost? kept separate from the costs added during the current month. This means that there are two cost pools when FIFO is used.

D) Manufacturing Overhead Control account is credited with spoiled goods at current net disposal value. 13) Firms https://accounting-services.net/ often conduct multiple inspections to avoid instances of undetected spoiled units at later stages of the process.

Financial Accounting

B) In accounting for scrap, there is no distinction between the scrap attributable to a specific job and scrap common to all jobs. C) Initial entries to scrap accounting records are most often made in dollar terms. D) Scrap records not only help measure efficiency, but also help keep track of scrap, and so reduce the chances of theft. 8) When assigning costs, job-costing systems generally distinguish normal spoilage attributable to a specific job from normal spoilage common to all jobs. 5) Which of the following sentences is true of classification of spoilage as normal or abnormal when inventories are present?

Spoilage beyond what is historically standard or expected is considered abnormal spoilage. In accounting, abnormal spoilage is an expense item and is recorded separately from normal spoilage on internal books and financial statements. Fundamentally, it is the cost of production that bears the cost of normal loss. Unlike normal loss, the abnormal loss is transferred to the Costing Profit and Loss Account . Normal losses are expected as they occur at the normal process of production. In contrast, abnormal loss is unexpected, as they arise due to inefficiencies in the production process and can be avoided when the production environment is efficient. Abnormal spoilage is spoilage that goes far beyond the acceptable limit and may be due to defective machines, low-quality materials, or even incompetent machine operators.

Chapter 6-cost

D. Completed and transferred out units + Ending work-in-process equivalent units. Accountants post the cost of abnormal spoilage to a “loss for abnormal spoilage” account. The loss isn’t related to cost of goods manufactured. Instead, abnormal spoilage is a separate cost that you can’t recover.

That would produce defective units and avoidable costs. \nIf an employee isn’t properly trained, he or she may make mistakes, and those errors may produce a defective product. Explain when should variances be allocated to work in process finished goods and cost of goods sold rather than just charge to the cost of goods sold at the end of the period. Under which method of inventory cost flows is the cost flow assumed to be in the reverse order in which the expenditures were made? Weighted average.

On the other hand, any loss arising accidentally due to unforeseen events is termed as an abnormal loss. As these are considered as an expense to the company, the cost is not included in the cost of production. Abnormal spoilage, which is considered avoidable and controllable, is charged to a separate expense account that will show up on a line item further down the income statement. It, therefore, has no impact on gross margin. Step III Both Methods.