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Spoilage and Inventory Management – Quiz Essay

Direct manufacturing labor20
Allocated manufacturing overhead 80
Final inspection of Job 911 disclosed 100 defective units and 50 spoiled units. The defective instruments were reworked at a total cost of $12,000, and the spoiled instruments were sold to a jobber for $3,000.

If the costs associated with spoilage and reworked units are considered as normal to manufacturing operations, the unit cost of the good units produced on Job 911 is (Points : 6)

(TCO 6) Walbreck Company had the following production for the month of August. Units
Work in process, August 1 6,000
Started during August24,000
Completed and transferred to finished goods18,000
Abnormal spoilage incurred3,000
Work in process, August 31 9,000
Materials are added at the beginning of the process. As to conversion cost, work in process was 20% complete at the beginning and 70% complete at the end of the month. Spoilage is detected at the end of the process.

Using the weighted-average method, the equivalent units for August, with respect to conversion costs, were (Points : 6)

3. (TCO 6) The sale of scrap from a manufacturing process usually would be recorded as a(n) (Points : 6) increase in manufacturing overhead control.
decrease in manufacturing overhead control.
increase in finished goods control.
decrease in finished goods control.

4. (TCO 6) Libations Corporation manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a production run is $50. There are no flag displays on hand, but Libations had scheduled 60 equal production runs of the display sets for the coming year, the first of which is to be run immediately. Libations Corporation has 250 business days per year. Assume that sales occur uniformly throughout the year and that production is instantaneous. The estimated total setup cost for the flag displays for the coming year is (Points : 6) $2,000.


(TCO 6) Blaster began operations in June 20XX. Blaster manufactures vehicle seat covers using a just-in-time production system supported by a backflush costing system. This system has two trigger points: (1) the purchase of raw materials, and (2) the sale of finished good units. Standard unit costs are $40 for raw materials and $25 for conversion costs. Blaster writes off any underallocated or overallocated conversion costs immediately. The following
data were available for June 20XX. Production of good units19,800

Sales of good units19,750
Purchases of raw materials [20,000 units at $40]$800,000
Conversion costs incurred$496,000
The June ending total for all inventory balances is
(Points : 6)

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