(Defective units and rework) Hoffus Corporation produces plastic pipe to customer specifications. Losses of less than 5 percent are consideied normal because they are inherent in the production process. The company applies overhead to products using machine hours. Hoffus Corporation used the fol¬ lowing information in setting its predetermined overhead rate for 2006:

a. Determine the overhead application rate for 2006.

b. Determine the cost for Job #B3l6 in 2006.

c. Assume that the rework is normal and those units can be sold for the regular selling price. How will Hoffus Corporation account for the $37,750 of rework cost?

d. Assume that Hoffus does not include rework costs in developing the overhead application rate because rework is related to specific jobs. De termine the cost of Job #B3l6.

e. Using the information from part (d), assume that 20 percent of the re¬ work cost was specifically related to 200 feet of pipe produced for Job #B3l6. The reworked pipe can be sold for $1.50 per foot. What is the total cost of Job #B3l6?

Transcribed Image Text:

Expected overhead other than rework $425,000 Expected rework costs 37,500 Total expected overhead $462,500 Expected machine hours for 2006 50,000 During 2006, the following production and cost data were accumulated: Total good production completed Total defects Ending inventory Total cost of direct material for Job #B316 Total cost of conversion for Job #B316 Total machine hours for Job #B316 Cost of reworking defects during 2006 Total actual overhead cost for 2006 2,000,000 feet of pipe 40,000 feet of pipe 75,000 feet of pipe $343,550 $78,875 1,540 $37,750 $431,000