Garvey Company is a specialty print shop. Usually, printing jobs are priced at standard cost plus 50 percent. Job 95-301 involved printing 500 wedding invitations with the following standard costs:

Normally, the invitations would be taken from the machine, the top one inspected for correct wording, spelling, and quality of print, and all of the invitations wrapped in plastic and stored on shelves designated for completed jobs. In this case, however, the technician decided to go to lunch before inspecting and wrapping the job. He stacked the unwrapped invitations beside the printing press and left. One hour later, he returned and found the invitations had fallen on the floor and been stepped on. It turned out that about 100 invitations were ruined and had to be discarded. An additional 100 invitations were then printed to complete the job.

Required:

1. Calculate the cost of the spoiled invitations. How should the spoilage cost be accounted for?
2. What is the price of Job 95-301?
3. Suppose that another job, 95-442, also required 500 wedding invitations. The standard costs are identical to those of Job 95-301. However, Job 95-442 required an unusual color of ink which could only be obtained in a formula which was difficult to use. Garvey printers know from experience that getting this ink color to print correctly requires trial and error. In the case of Job 95-442, the first 100 invitations had to be discarded due to inconsistencies in the color of ink. What is the cost of the spoilage, and how would it be treated?
4. What is the price of Job 95-442?

Transcribed Image Text:

Direct materials $200 Direct labor 20 Overhead Total 30 $250