Ralph Co manufactures products on a job-order basis. Job 4 is an order for 100 u

Question

Ralph Co manufactures products on a job-order basis. Job 4 is an order for 100 units. It requires $3,000 direct materials, $1,000 direct labor, and $1,500 overhead applied based on 150% the direct labor hours. After inspection, 2 units required rework which required $80 additional direct labor costs and $60 of materials. 5. (1) If the rework is considered normal spoilage due to the nature of the job, determine the cost of Job 4. Prepare the journal entry for overhead. for overhead. entry for overhead control? (2) If the rework is considered normal spoilage, determine the cost of Job 4. Prepare the journal entry (3) If the rework is considered abnormal spoilage, determine the cost of Job 4. Prepare the journal

Explanation / Answer

Job Costing and Rework:

Job costing has created a system wherein rework and spoilage costs are allocated to the respective job where the loss is supposed to have occurred. This helps the company find out the types of jobs it is efficient and not efficient in and therefore work on reducing costs:

1. if it is considered as normal spoilage in the nature of job

Journal Entry

Work in progress control A/c...............260

..............To Job A/c............................................260

2.

Manufacturing overhead control A/c ...........Dr 260

.....................To Cost of Production A/c........................260

3.

Loss from abnormal rework A/c.............Dr 260

..............To Costing Profit and Loss A/c..................260

Thank You

Particulars Amount Direct materials 60 Direct labour Costs 80 Overhead costs(150% of Direct labour costs) 120(80*150%) Total 260

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