JACK Incorporated requires an average lead time of 45 days on customer orders that requires parts not kept in stock. When such customer received, the part order is placed with a vendor immediately by telephone, and parts are received in an average of three days after receipt. The average time spent in production is 16 days. After production is completed, the order goes through final inspection in two days and arrives at the customer's site after an additional three days on average. Management plans to leave the rate of final output unchanged, induce vendors to reduce their total lead time by one third, and reduce average size of WIP to one fourth of its present level.

Requirement.

assuming management plans are implemented successfully, calculate the average lead time on customer orders that requires parts mot kept in stock.

Problem 2

Jam inc. produces small toys on special order. In may a contract for the production of 120 toys at a cost plus fixed fee of $2,290 was completed. A charge invoice has sent to the accounting department of STY Corporation, containing the following data:

Direct material $11,814.70

Direct labor 15,660

FOH 5,220

Total 32,695

Fixed fee 2,290

Total (120 toys) 34,985

Transcribed Image Text:

tys Upon receipt, STY's accountant objected to this billing, stating that the spoilage of 5 motors and additional cost for defective motor had been charged directly to their Job) where as the procedure previously has been to spread such cost over all jobs. The spoiled toys had been sold as scrap for $50 each, and the original scrap value was assigned to them. The defective toys required P30 of additional materials and 5 labor hours to correct its defects. Workers on the contract were paid P6 per hour and had worked a total of 7,200 fours, of which 2,630- hours had been spent on STY's contact. The company uses a predetermined factory overhead rate of P2 per labor hour. Each toy requires P95 of direct materials. Spoiled and defective work is discovered during final inspection after all normal labor cost has been incurred. Required: Assuming the company's work in process account has not been credited foe any work completed during May: a. Prepare all journal entries that the company has made in connection with this contract b. Prepare the journal entries the company should have made for the spoiled and defective work c. Prepare journal entries to correct the books and complete the contract. d) Prepare a revised charge invoice tys Upon receipt, STY's accountant objected to this billing, stating that the spoilage of 5 motors and additional cost for defective motor had been charged directly to their Job) where as the procedure previously has been to spread such cost over all jobs. The spoiled toys had been sold as scrap for $50 each, and the original scrap value was assigned to them. The defective toys required P30 of additional materials and 5 labor hours to correct its defects. Workers on the contract were paid P6 per hour and had worked a total of 7,200 fours, of which 2,630- hours had been spent on STY's contact. The company uses a predetermined factory overhead rate of P2 per labor hour. Each toy requires P95 of direct materials. Spoiled and defective work is discovered during final inspection after all normal labor cost has been incurred. Required: Assuming the company's work in process account has not been credited foe any work completed during May: a. Prepare all journal entries that the company has made in connection with this contract b. Prepare the journal entries the company should have made for the spoiled and defective work c. Prepare journal entries to correct the books and complete the contract. d) Prepare a revised charge invoice

Answer rating: 100% (QA)

a Journal entries made by the company Work in Process 1181470 Direct Materials 1181470 To record dir... View the full answer