18.

4
15e: 18.4

Abnormal spoilage is spoilage that is not inherent in a particular production process and
would not arise under efficient operating conditions. Costs of abnormal spoilage are “lost costs,”
measures of inefficiency that should be written off directly as losses for the accounting period.

18.6
15e: 18.6

Normal spoilage typically is expressed as a percentage of good units passing the

inspection point. Given actual spoiled units, we infer abnormal spoilage as follows:
Abnormal spoilage = Actual spoilage – Normal spoilage.

18.9
15e: 18.9

Yes, the point of inspection is the key to the assignment of spoilage costs. Normal
spoilage costs do not attach solely to units transferred out. Thus, if units in ending work in
process have passed inspection, they should have normal spoilage costs added to them.

18.1
15e: 18.10

No. If abnormal spoilage is detected at a different point in the production cycle than
normal spoilage, then unit costs would differ. If, however normal and abnormal spoilage are
detected at the same point in the production cycle, their unit costs would be the same.
18.20
15e: 18.16

1. Total spoiled units 12,600

- Normal spoilage in units 6,800 4%*170000
= Abnornal spoilage in units 5,800

Normal spoilage 4%
Good Units 170,000

2. Abnornal spoilage 63,800 5.800*11

Normal spoilage 74,800 6.800*11
Potential savings 138,600

Cost /equivalent unit 11

Regardless of the targeted normal spoilage, abnormal spoilage is non-recurring and

avoidable. The targeted normal spoilage rate is subject to change. Many companies have reduced
their spoilage to almost zero, which would realize all potential savings. Of course, zero spoilage
usually means higher-quality products, more customer satisfaction, more employee satisfaction,
and various beneficial effects on nonmanufacturing (for example, purchasing) costs of direct
materials.
18.35
15e: 18.31WA

DM CC
Introduction in the process Beginning Evenly
Degree of completion (WIP beg.) 100% 60%
Degree of completion(WIP end.) 100% 30%
Inspection point 100% End

Step 1 Step 2 Normal spoilage 2,460

Equivalent units % 10%
Physical un. DM CC Good units completed 24,600 A quebra refere-se apenas às
unidades acabadas (pq PI está
WIP Beg. 3,600 depois da % acabamento dos
Started during current period 30,000 Total spoilage 3,960 PVF)
To account for 33,600 + WIP beg. 3,600
+ Started 30,000
Good units completed and transferred out 24,600 24,600 24,600 100% - Completed and tranferred 24,600
Normal spoilage 2,460 2,460 2,460 100% Inspection Point - WIP end. 5,040
Abnormal spoilage 1,500 1,500 1,500 100% Inspection Point
WIP end. 5,040 5,040 1,512 100%*5.040; 30%*5.040 Abnormal spoilage 1,500
Accounted for 33,600 + total spoilage 3,960
Equivalent units 33,600 30,072 - normal spoilage 2,460

Total
production
costs DM CC
Step 3 WIP Beg. 7,269 5,316 1,953
Costs added in the current period 100,159 55,500 44,659
Total costs to account for 107,428 60,816 46,612

Step 4 Costs incurred to date 60,816 46,612

Equivalent units 33,600 30,072
Cost per equivalent unit 1.8100 1.5500

Step 5 Assignment of costs

Costs before adding normal spoilage 82,656 44,526 38,130 24.600*1.81;24.600*1,55
Normal spoilage 8,266 4,453 3,813 2.460*1.81;2.460*1,55
Total cost of good units and transferred 90,922 48,979 41,943
Abnormal spoilage 5,040 2,715 2,325 1.500*1.81;1.500*1,55
WIP end. 11,466 9,122 2,344 5.040*1.81;1.512*1,55
Total costs accounted for 107,428 60,816 46,612
18.36
15e: 18.32FIFO

DM CC
Introduction in the process Beginning Evenly
Degree of completion (WIP beg.) 100% 60%
Degree of completion(WIP end.) 100% 30%
Inspection point 100% End

Step 1 Step 2
Equivalent units
Physical un. DM CC
WIP Beg. 3,600
Started during current period 30,000
To account for 33,600

Good units completed and transferred out 24,600

From WIP Beg 3,600 0 1,440 (100%-100%)*3.600; (100%-60%)*3.600
Strated and completed 21,000 21,000 21,000 100%
Normal spoilage 2,460 2,460 2,460 100% Inspection Point
Abnormal spoilage 1,500 1,500 1,500 100% Inspection Point
WIP end. 5,040 5,040 1,512 100%*5.040; 30%*5.040
Accounted for 33,600
Equivalent units 30,000 27,912

Total
production
costs DM CC
Step 3 WIP Beg. 7,269 5,316 1,953
Costs added in the current period 100,159 55,500 44,659
Total costs to account for 107,428 60,816 46,612

Step 4 Costs added in current period 55,500 44,659

Un equivalentes 30,000 27,912
Cost per equivalent unit 1.8500 1.6000

Step 5 Assignment of costs

WIP Beg. 9,573 5,316 4,257
WIP Beg. (3.600) 7,269 5,316 1,953
Costs added toWIP beg. in current period 2,304 0 2,304 0*1,85; 1.440*1,6
Started and completed before normal spoilage (21.000) 72,450 38,850 33,600 21.000*1,85; 21.000*1,6
Normal spoilage (2.460) 8,487 4,551 3,936 2.460*1,85; 2.460*1,6
Total costs of good units completed and transferred out 90,510 48,717 41,793
Abnormal spoilage (1.500) 5,175 2,775 2,400 1.500*1,85;1.500*1,6
WIP end. (5.040) 11,743 9,324 2,419 5.040*1,85;1.512*1,6
Total costs accounted for 107,428 60,816 46,612
18.37
15e: 18.33WA
Tranf in DM CC
Introduction in the process End Evenly
Degree of completion (WIP beg.) 100% 0% 70%
Degree of completion(WIP end.) 100% 0% 40%
Degree of completion(spoilage) 100% 100% 100%
Inspection point 100% End

Step 1 Step 2
Equivalent units
Tranferred in
Physical un. costs DM CC
WIP Beg. 12,600 Normal spoilage 2,112
Started during current period 24,600 % 8%
To account for 37,200 Good units completed 26,400

Good units completed and transferred out 26,400 26,400 26,400 26,400 100% Total spoilage 2,400
Normal spoilage 2,112 2,112 2,112 2,112 100% Inspection Point + WIP beg. 12,600
Abnormal spoilage 288 288 288 288 100% Inspection Point + Started 24,600
WIP end. 8,400 8,400 0 3,360 100%*8.400; 0%*8.400; 40%*8.400 - Completed and tranferred 26,400
Accounted for 37,200 - WIP end. 8,400
Equivalent units 37,200 28,800 32,160
Abnormal spoilage 288

Total production Tranferred in

costs costs DM CC + total spoilage 2,400
Step 3 WIP Beg. 57,173 33,698 0 23,475 - normal spoilage 2,112
Costs added in the current period 137,527 90,922 5,760 40,845
Total costs to account for 194,700 124,620 5,760 64,320

Step 4 Costs incurred to date 124,620 5,760 64,320

Equivalent units 37,200 28,800 32,160
Cost per equivalent unit 3.35 0.20 2.00

Step 5 Assignment of costs

Costs before adding normal spoilage 146,520 88,440 5,280 52,800 26.400*3.35;26.400*0.2;26.400*2
Normal spoilage (2.112) 11,722 7,075 422 4,224 2.112*3.35;2.112*0.2;2.112*2
Total cost of good units and transferred (26.400) 158,242 95,515 5,702 57,024
Abnormal spoilage (288) 1,598 965 58 576 288*3.35;288*0.2;288*2
WIP end. (8.400) 34,860 28,140 0 6,720 8.400*3.35;0*0.2;3.360*2
Total costs accounted for 194,700 124,620 5,760 64,320
18.38
15e: 18.34FIFO
Tranf in DM CC
Introduction in the process End Evenly
Degree of completion (WIP beg.) 100% 0% 70%
Degree of completion(WIP end.) 100% 0% 40%
Degree of completion(spoilage) 100% 100% 100%
Inspection point 100% End

Step 1 Step 2
equivalent units
Tranferred in
Physical un. costs DM CC
WIP Beg. 12,600
Started during current period 24,600
To account for 37,200

Good units completed and transferred out 26,400

From WIP Beg 12,600 0 12,600 3,780 (100%-100%)*12.600; (100%-0%)*12.600; (100%-70%)*12.600
Strated and completed 13,800 13,800 13,800 13,800 100%
Normal spoilage 2,112 2,112 2,112 2,112 100% Inspection Point
Abnormal spoilage 288 288 288 288 100% Inspection Point
WIP end. 8,400 8,400 0 3,360 100%*8.400; 0%*8.400;40%*8.400
Accounted for 37,200
Equivalent units 24,600 28,800 23,340

Total
production Tranferred in
costs costs DM CC
Step 3 WIP Beg. 56,565 33,090 0 23,475
Costs added in the current period 137,115 90,510 5,760 40,845
Total costs to account for 193,680 123,600 5,760 64,320

Step 4 Costs added in current period 90,510 5,760 40,845

Un equivalentes 24,600 28,800 23,340
Cost per equivalent unit 3.679 0.200 1.750

Step 5 Assignment of costs

WIP Beg. 65,700 33,090 2,520 30,090
WIP Beg. (12.600) 56,565 33,090 0 23,475
Costs added toWIP beg. in current period 9,135 0 2,520 6,615 0*3,679;12.600*0,2;3.780*1.75
Started and completed before normal spoilage 77,684 50,774 2,760 24,150 13.800*3,679;13.800*0,2;13.800*1.75
Normal spoilage (2.112) 11,889 7,771 422 3,696 2.112*3,679;2.112*0,2;2.112*1.75
Total costs of good units completed and transferred out(20.500 155,273 91,634 5,702 57,936
Abnormal spoilage (288) 1,621 1,060 58 504 288*3,679;288*0,2;2800*1.75
WIP end. (8.400) 36,786 30,906 0 5,880 8.400*3,679;0*0,2;3.360*1.75
Total costs accounted for 193,680 123,600 5,760 64,320
18.44
15e: 18.41 WA
Tranf in DM CC 80% 90% 95% 100% Spoilage includes no direct materials un
Introduction in the process 90% Evenly PI DM EWIP removed from the finishing activity whe
Degree of completion (WIP beg.) 100% 0% 25% 80% complete. Direct materials are adde
Degree of completion(WIP end.) 100% 100% 95% complete.
Degree of completion(spoilage) 100% 0% 80%
Inspection point 80% End Ending work in process includes an elem
WIP have passed the point of inspection
Step 1 Step 2 complete, while the units in ending WIP
equivalent units
Tranferred
Physical un. in costs DM CC
WIP Beg. 25,000 Normal spoilage on good units
Started during current period 175,000 %
To account for 200,000 Good units completed

Good units completed and transferred out 125,000 125,000 125,000 125,000 100% Normal spoilage on WIP end.
Normal spoilage on good units 12,500 12,500 0 10,000 100%*12.500;0%12.500; 80%*12.500 %
Abnormal spoilage 7,500 7,500 0 6,000 100%*7.500;0%*7.500; 80%*7.500 WIP end.
WIP end. 50,000 50,000 50,000 47,500 100%*50.000; 100%*50.000; 95%*50.000
Normal spoilage on WIP end. 5,000 5,000 0 4,000 Total spoilage
Accounted for 200,000 + WIP beg.
Equivalent units 200,000 175,000 192,500 + Started
- Completed and transferred

Total
productio Tranferred
n costs in costs DM CC - WIP end.
Step 3 WIP Beg. 312,250 207,250 0 105,000
Costs added in the current period 6,385,750 1,618,750 1,638,000 3,129,000
Total costs to account for 6,698,000 1,826,000 1,638,000 3,234,000 Abnormal spoilage
+ total spoilage
Step 4 Costs incurred to date 1,826,000 1,638,000 3,234,000 - normal spoilage on complted unit
Equivalent units 200,000 175,000 192,500 - Normal spoilage on WIP end.
Cost per equivalent unit 9.13 9.36 16.80

Step 5 Assignment of costs

Costs before adding normal spoilage 4,411,250 1,141,250 1,170,000 2,100,000
Normal spoilage 282,125 114,125 0 168,000
Total cost of good units and transferred 4,693,375 1,255,375 1,170,000 2,268,000
Abnormal spoilage 169,275 68,475 0 100,800
WIP end. Before normal spoilage 1,722,500 456,500 468,000 798,000
Normal spoilage on WIP end. 112,850 45,650 0 67,200
WIP end. 1,835,350 502,150 468,000 865,200
Total costs accounted for 6,698,000 1,826,000 1,638,000 3,234,000
s units because spoiled units are detected and
when inspection occurs at the time production is
added only later when production is 90%

element of normal spoilage since all the ending

tion––inspection occurs when production is 80%
WIP are 95% complete.

12,500
10%
125,000

5,000
10%
50,000

25,000
25,000
175,000
125,000

50,000

7,500
25,000
12,500
5,000