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Lecture Scrap Spoiled and Defective

The document discusses accounting procedures for spoilage, reworks, and scrap materials. Spoilage costs are either charged to specific jobs if caused by customer actions, or charged to all jobs if caused by internal failures. Reworks follow the same accounting rules. Scrap materials are accounted for either as other income when sold or charged to specific jobs or factory overhead control. An example problem tracks the costs of production including spoilage through work in process and finished goods inventory accounts.

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96 views4 pages

Lecture Scrap Spoiled and Defective

The document discusses accounting procedures for spoilage, reworks, and scrap materials. Spoilage costs are either charged to specific jobs if caused by customer actions, or charged to all jobs if caused by internal failures. Reworks follow the same accounting rules. Scrap materials are accounted for either as other income when sold or charged to specific jobs or factory overhead control. An example problem tracks the costs of production including spoilage through work in process and finished goods inventory accounts.

Uploaded by

GianJoshuaDayrit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Accounting for Spoilage

Charged to Specific Job (reason for the defect is due from the action taken by the customer) (FOH rate is net of Allo
Spoiled Goods Inventory @ Sales Value XXX
Work In Process XXX

Charged to all Jobs(Production) (reason for the defect is internal failure) (FOH rate is inclusive of Allowance for Sp
Spoiled Goods Inventory @ Sales Value XXX
Factory Overhead Control (Loss from spoilage = Cost - Sales Value) XXX
Work in Process XXX

Accounting for Reworks


Charged to Specific Job (reason for the defect is due from the action taken by the customer) (FOH rate is net of Allo
Work in Process XXX
Materials XXX
Payroll XXX
Factory Overhead Applied XXX
Charged to all Jobs(Production) (reason for the defect is internal failure) (FOH rate is inclusive of Allowance for Re
Factory Overhead Control XXX
Materials XXX
Payroll XXX
Factory Overhead Applied XXX

Accounting Scrap Material


a) at point of sale
1) Other Income (Scrap Sales)
2) Charged to specific job (WIP)
3) Charged to all jobs (FOHC)

Cash XXX
Scrap Sales/WIP/FOHC XXX

b) at the point of recovery


1) Charged to specific job (WIP)
2) Charged to all jobs (FOHC)

upon recovery
Scrap Materials XXX
WIP/FOHC XXX

upon sale
Cash XXX
Scrap Materials XXX

Problem 7
All Jobs Unit Cost
Incurrence of cost
Work in Process 12,400,000.00
Materials 3,600,000.00
Payroll 4,000,000.00
Factory Overhead Control 4,800,000.00
12,400,000.00 1,240.00
To record the spoilage
Spoiled Goods Inventory 100,000.00
Factory Overhead Control 24,000.00
Work in Process 124,000.00

To record the completion of the 9,900 units


Finished Goods Inventory 12,276,000.00
Work in Process 12,276,000.00 1,240.00
ustomer) (FOH rate is net of Allowance for Spoilage)

s inclusive of Allowance for Spoilage)

ustomer) (FOH rate is net of Allowance for Rework)


30.00
5.00
10.00
15.00
s inclusive of Allowance for Rework)

RSP 150
SP as Seconds 75 75

Cost of production 100


cost of rework
M 5
L 10
OH 15
30
45
SP 75 150
Cost 100 130
-25 20

Specific Unit Cost

11,600,000.00
3,600,000.00
4,000,000.00
4,000,000.00
11,600,000.00 1,160.00

100,000.00

100,000.00

11,500,000.00
11,500,000.00 1,161.62

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