Chapter 12 Exercises

Step-by-Step Exercises

First, calculate the cost per unit to value spoilage.

Question 1

Gareyev, Inc. completed a job that cost $5,600,000 to manufacture 1,600,000 units.

Calculate the cost per unit to value spoilage.

Question 2

Leko Company received an order for 600 units but ended up manufacturing 30 extra units to replace spoilage. The manufacturing costs for the job were $283,500.

Calculate the cost per unit to value spoilage.

Question 3

Anand Manufacturing completed a job that cost $336,000 for 96 units. The original order was for 90 units, but 96 units had to be manufactured because 6 units were spoiled.

Calculate the cost per unit to value spoilage.

Next, calculate the cost for each category of spoilage and rework.

Question 4

Capricorn Production completed a job whose per-unit manufacturing cost was $20 per unit. The job resulted in 1,500 units that passed inspection and 15 units of normal spoilage. A storm damaged 10 units, resulting in a total of $75 of abnormal rework costs. The customer rejected 5 units and asked that another 7 units be repaired at a total cost of $35.

Calculate the cost for each category of spoilage and rework.

Question 5

Knight, Inc. manufactured 10,050 units at a cost of $450 each, including 45 units of normal spoilage. Five units were crushed in an accident and were categorized as abnormal spoilage. The same accident damaged two units, which required abnormal rework costs of $75 each. Ten units were damaged in the normal production process, requiring normal rework costs of $20 each. The customer was satisfied with the units that were delivered to her.

Calculate the cost for each category of spoilage and rework.

Question 6

Macmurphy Company completed a job with a per-unit cost of $3,600. The job resulted in two units of normal spoilage, one unit of abnormal spoilage, and one unit that the customer rejected. Repairs had to be made at a cost of $350 per unit for three units damaged in normal production, two units damaged in a lightning strike, and five units for which the customer requested repairs be made.

Calculate the cost for each category of spoilage and rework.

Next, calculate the cost of spoilage and rework that should be debited to the manufacturing overhead account or a loss account.

Question 7

Job 1840 resulted in $3,000 worth of normal spoilage, $1,000 worth of abnormal spoilage, and $540 worth of abnormal rework.

Calculate the cost of spoilage and rework that should be debited to the manufacturing overhead account or a loss account.

Question 8

On Job 13A, 20 units had to be repaired at a total cost of $50,000 because the customer was not satisfied with their quality. In addition, 15 units that cost a total of $75,000 to manufacture were spoiled as a normal result of the production process, and 10 units of abnormal spoilage were destroyed in a fire.

Calculate the cost of spoilage and rework that should be debited to the manufacturing overhead account or a loss account.

Question 9

An order for Fischer Company cost $550,000 before accounting for spoilage and rework. Five percent of the units produced were spoiled as a normal part of the production process. Two percent of the units produced did not meet the customer’s requirements and were deemed irreparable. Several units required repairs after being run over by a piece of equipment; the cost of this abnormal rework was $40,000.

Calculate the cost of spoilage and rework that should be debited to the manufacturing overhead account or a loss account.

Finally, calculate the cost of the job after accounting for spoilage and rework.

Question 10

Job 1972 cost $1,000,000 before accounting for spoilage and rework, and resulted in $10,000 in normal spoilage, $40,000 in customer-related spoilage, and $100,000 in abnormal rework.

Calculate the cost of the job after accounting for spoilage and rework.

Question 11

Job 27B cost $550,000 before accounting for spoilage and rework, and resulted in $40,000 in abnormal spoilage, $10,000 in customer-related spoilage, and $30,000 in normal rework.

Calculate the cost of the job after accounting for spoilage and rework.

Question 12

The Kappa job cost $60,000 before accounting for spoilage and rework, and resulted in $1,200 in normal spoilage, $10,000 in abnormal spoilage, and $5,000 in customer-related rework.

Calculate the cost of the job after accounting for spoilage and rework.

Complete Problems

Question 13

Seirawan, Inc. manufactured 370 units for a job that cost $35,150. Of those units, 15 were destroyed as a normal part of the production process. An accident occurred that caused 5 units to be destroyed and 5 units to require repairs costing a total of $200. In addition, the customer requested repairs to 10 more units, costing a total of $450.

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.

Question 14

Giri Corporation manufactured 45 units for a job that cost $1,500 each. Three units were damaged as a normal part of the production process and had to be repaired at a cost of $250 each. Five units were destroyed in a tornado. In addition, the customer rejected two units.

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.

Question 15

Yangyi, Inc. spent $5,760 to manufacture 3,600 units for a job. During the production process, 55 units were spoiled and 15 units were damaged, requiring repairs costing a total of $10. A flood destroyed 35 units. The customer also rejected 10 units and asked that another 20 units be repaired at a cost of $25.

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.

Question 16

During the period, Job 46C was completed, costing $151,350. Although the customer wanted 1,000 units, 9 extra units had to be manufactured because 9 units were destroyed when a machine malfunctioned (this is considered abnormal). In addition, 25 units had to be repaired at a total cost of $1,750 because they were damaged during the production process. The customer also asked for repairs to 20 units, which cost a total of $1,200.

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.

Question 17

Omaluco, Inc. received an order for 350 units, but ended up manufacturing 389 units at a cost of $9,608.30. Of those units, 19 were spoiled as a normal part of the production process. An additional 50 units needed repairs as a normal result of the production process, costing $20 per unit. Another 20 units were destroyed when a truck ran over them.

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.

Question 18

Palatino Company completed Job 1024 at a cost of $46,500. After inspecting the job, Palatino’s customer requested that the handle on the units be replaced, which cost Palatino $11,000. Of the 300 units produced, 10 were discarded as normal spoilage because of routine problems in the manufacturing process. An additional 5 units had to be repaired at a cost of $250 (total) after they were damaged by a piece of falling equipment.

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.

Assignment Problem

Note: Check figures are not provided for assignment problems so your instructor may use them for homework.

Question 19

Davison Construction spent $850,000 constructing a new strip mall. Seven percent of that cost was spent on part of the building that was destroyed because of a tornado and had to be rebuilt. This was considered an abnormal event. Another five percent of the cost was for roof tiles that had to be replaced because the roof did not pass inspection. This occurrence was considered a normal part of the construction process. $2,000 of the cost was to refinish some drywall that the customer was not satisfied with.

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.

Challenge Problem

Question 20

The following information relates to Job 207 completed by SpruceCo:

• $12,000 was spent on direct materials
• $15,000 was spent on direct labor
• Manufacturing overhead was applied to the job at a rate of 110% of direct materials cost
• $1,500 was spent on repair costs
• $2,000 was debited to manufacturing overhead
• $1,800 was debited to a loss account, $1,100 of which was also removed from the cost of the job
• The customer had no complaints

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.

Pre-Assessment Problem

Use this problem to check whether you are fully prepared for the assessment. Work the problem under assessment conditions – don’t use any notes or other materials!

Question 21

This period Firouzja Inc. received an order for 200 units. Firouzja ended up spending $11,500 to manufacture 230 units, as 30 units ended up spoiled, so replacements were needed. Of the spoiled units, 20 were deemed defective as a normal part of the production process, while the other 10 were destroyed in a fire that also damaged goods that cost $100 (total) to repair. In addition, Firouzja spent $650 on modifications requested by the customer.

Categorize and find the cost of all spoilage and rework associated with the job, the amount of spoilage and rework cost that should be debited to manufacturing overhead and to a loss account, and the cost of the job after accounting for spoilage and rework.