Accounting for defective units that are reworked The Heartland Wood Products Com- pany makes a variety of quality wood furniture products. A major item is a solid oak coffee table which sells for $225 per unit. Each unit is carefully inspected upon completion, and any flaws in the table are repaired. Sometimes tables can be repaired simply by rebuffing the table surface. Other times, defective tables may have the finish stripped off and an entire new finish applied.

During May, 1,200 oak coffee tables were manufactured. Production costs for the month were $77,400 for direct materials, $45,000 for direct labor, and $36,000 for applied overhead.

Of the tables produced in May, 80 did not pass inspection for various reasons and had to be reworked. Additional manufacturing costs to rework the defective units were direct materials of $1,800, direct labor of $2,100, and overhead applied as a percentage of direct labor cost.

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REQUIRED a. Compute the unit cost of the tables if the cost of the defective units is charged to all production. b. Compute the unit cost of the tables if the cost of defective units is charged to the coffee tables. c. Record the cost of reworking the units for both of the situations described above. d. Record the sale of the coffee tables on open account for each of the situations described in parts a and b. e. Compute the percentage gross margin on sales for each of the situations in parts a and b.