Cost Accounting

Practice question

The Spurrier Products Company manufactures, among other items, a unique

nutcracker. One order from the San Diego Specialty Company for 1000 nutcrackers

showed the following costs per unit:

Materials

$3.00

Labor

2.00

Factory overhead applied at rate of 125% of labor cost. Final inspection revealed that

120 units were improperly machined and thus defective. These units were broken

down, properly machined, and reassembled. Cost of correcting the defective

nutcrackers consists of $1.20 per unit labor plus overhead at the normal rate, which

includes an allowance for defective work.

Required: Entries to record all costs related to the completion of the order

when the

(a) Cost of correcting defective work is charged to whole production

(b) Cost of correcting defective work is charged to a specific order.

Practice question The Spurrier Products Company manufactures, among other items, a unique nutcracker. One order from the San Diego Specialty Company for 1000 nutcrackers showed the following costs per unit: MaterialsLabor$3.002.00 Factory overhead applied at rate of 125% of labor cost. Final inspection revealed that 120 units were improperly machined and thus defective. These units were broken down, properly machined, and reassembled. Cost of correcting the defective nutcrackers consists of $1.20 per unit labor plus overhead at the normal rate, which includes an allowance for defective work. Required: Entries to record all costs related to the completion of the order when the (a) Cost of correcting defective work is charged to whole production (b) Cost of correcting defective work is charged to a specific order