Wyoming Cabinet Company manufactures custom cabinets for homebuilders. During the current period, an order for 1,000 custom cabinets was begun as Job 8962 for Burrows Park Housing Corporation. Custom jobs are priced at 150 percent of cost. Total costs charged to Job 8962 are:
Materials ....................................................... $92,000
Labor (3,000 hours x $12 per hour) ........................ 36,000
Factory overhead ($24 per labor hour) .................... 72,000
Total cost charged to Job 8962 .............................$200,000
Inspection revealed that 100 of the cabinets had defects. Materials costing $2 and 1/2 hour of labor are required to correct each defective unit. Factory overhead is charged to production on the basis of direct labor hours.
Required:
(1) Assuming the defective units resulted from internal failure, prepare the general journal entry to record the rework and the shipment of Job 8962 to the customer.
(2) Assuming the defective units resulted from a design change specified by the customer after the units were completed, prepare the general journal entry to record the rework and the shipment of Job 8962 to the customer.