Rework in a Job Order Cost System. Big Sky Cabinet Company manufactures custom cabinets for modular and
Question:
Rework in a Job Order Cost System. Big Sky Cabinet Company manufactures custom cabinets for modular and prefabricated housing companies. During the current period, an order for 1,000 custom cabinets was begun on job number 8962 for Burrows Park Housing Corporation. Custom jobs are marked up 150 percent of cost. Total costs charged to job number 8962 are: LO6 Materials. $ 92,000 Labor (3,000 hours x $12 perhour). 36,000 Factory overhead ($24 per laborhour). 72,000 Total cost charged to job number8962. $200,000 On inspection, 100 of the cabinets were found to have defects. Materials costing $4 and 'A hour of labor are required to correct each defective unit. Factory overhead is charged to production on the basis of direct labor hours.
Required:
(1) Assuming that the defective units are the result of an internal failure (that is, an employee error or a machine failure), prepare the appropriate general journal entry to record the rework of the defective units and the shipment of completed job number 8962 to the customer.
(2) Assuming that the defective units are the result of a change in design specified by the customer after the units are completed, prepare the appropriate general journal entry to record the rework of the defective units and the shipment of completed job number 8962 to the customer.
Step by Step Answer:
Cost Accounting
ISBN: 9780538828079
11th Edition
Authors: Lawrence H. Hammer, William K. Carter, Milton F. Usry