Industrial Fire (IF) Corporation is a manufacturer of computer chips based in Cavendish. It manufactures two types of computer chips, CS1 and CS2. The costs of manufacturing each CS1 chip, excluding rework costs, are direct materials, $69; direct manufacturing labor, $16; and manufacturing overhead, $41. Defective units are sent to a separate rework area. Rework costs per CS1 chip are direct materials, $14; direct manufacturing labor, $12; and manufacturing overhead, $16.

In August 2018, IF manufactured 1,600 CS1 chips and 1,300 CS2 chips; 92 of the CS1 chips and none of the CS2 chips required rework. IF classifies 72 of the CS1 chips reworked as normal rework caused by inherent problems in its production process that coincidentally occurred only during the production of CS1. Hence, the rework costs for these 72 CS1 chips are normal rework costs not specifically attributable to the CS1 product. IF classifies the remaining 20 units of CS1 chips reworked as abnormal rework. IF allocates manufacturing overhead on the basis of machine-hours required to manufacture CS1 and CS2. Each CS1 and CS2 chip requires the same number of machine-hours.

Requirement 1. Prepare journal entries to record the accounting for the cost of the spoiled chips and for rework.

Begin by journalizing the costs assigned to the spoiled units before considering the rework costs. (Record debits first, then credits. Explanations are not required.)

Requirement 2: What were the total rework costs of CS1 chips in August 2018?