Question

Cost of Normal Spoilage

Frieling Company installs granite countertops in customers' homes. First, the customer chooses the particular granite slab, and then Frieling measures the countertop area at the customer's home, cuts the granite to that shape, and installs it. The Tramel job calls for direct materials of $2,600 and direct labor of $1,300. Overhead is applied at the rate of 120 percent of direct labor cost. Unfortunately, one small countertop breaks during installation and Frieling must cut another piece and install it to properly complete the job. The additional rework required direct materials costing $1,100 and direct labor costing $800. Assume that the spoilage was due to carelessness by a Frieling worker and it is considered to be normal spoilage.

Required:

1. Calculate the cost of the Tramel job.

2. Make any needed journal entry to the overhead control account. If an amount box does not require an entry, leave it blank.

3. What if the additional rework required $1,600 of direct labor? What would be the effect on the cost of the Tramel job?

Answer 1

solution

The Tramel job calls for direct materials of $2,600 and direct labor of $1,300. Overhead is applied at the rate of 120 percent of direct labor cost

then  the additional rework required direct materials costing $1,100 and direct labor costing $800.

1)compution of cost of the tramel jod;

particulars amount $

direct material cost $2,600.00

direct labor cost 1300.00

overhead applied 1,560.00

total costs of job 5460.00

normal spoilage is expected due to the nature of the typical production process and the cost is included in overhead that is applied to all good units produced

2)particulars debit $ credit $

overhead cost 1300.00

to materials 1100.00

to labor 800.00

3)the cost of the tramel job would not be affected