Job costing, rework. Blue Titanium (BT) Corporation is a manufacturer of compute
ID: 2588601 • Letter: J
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Job costing, rework. Blue Titanium (BT) Corporation is a manufacturer of computer chips based in 9 Nepean. It manufactures two types of computer chips, CS1 and CS2. The costs of manufacturing each CS1 chip, excluding rework costs, are direct materials, $60; direct manufacturing labour, $12; and manufacturing overhead, $38. Defective units are sent to a separate rework area. Rework costs per CS1 chip are direct materials, $12; direct manufacturing labour, $9; and manufacturing overhead, $15. In August 2015, BT manufactured 1,000 CS1 chips and 500 CS2 chips; 80 of the CS1 chips and none of the CS2 chips required rework. BT classifies 50 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 50 CS1 chips are normal rework costs not specifically attributable to the CS1 product. BT classifies the remaining 30 units of CS1 chips reworked as abnormal rework. BT allocates manufacturing overhead on the basis of machine-hours required to manufacture CS1 and CS2. Each CS and CS2 chip requires the same number of machine-hours. Required 1. Prepare journal entries to record the accounting for the cost of the spoiled chips and for rework. 2. What were the total rework costs of CS1 chips in August 2015?Explanation / Answer
Wages Payable ($12×80) 960
Manufacturing Overhead Allocated ($38×80) 3,040
Total costs assigned to 80 spoiled units of CS1 chips before considering rework costs.
Manufacturing Department Overhead Control (rework) 1,800
Materials Control ($12×50) 600
Wages Payable ($9×50) 450
Manufacturing Overhead Allocated ($15×50) 750
Normal rework on 50 units, but not attributable specifically to the CS1 chip batches or jobs.
Loss from Abnormal Rework ($36×30) 1,080
Materials Control ($12×30) 360
Wages Payable ($9×30) 270
Manufacturing Overhead Allocated ($15×30) 450
Total costs of abnormal rework on 30 units (Abnormal rework = Actual rework – Normal rework = 80 – 50 = 30 units) of CS1 chips.
Work-in-Process Control (CS1 chips) 1,200
Work-in-Process Control (CS2 chips) 600
Manufacturing Department Overhead Allocated (rework) 1,800
(Allocating manufacturing department rework costs to CS1 and CS2in the proportion 1,000:500 since each chip requires the same number of machine-hours.)
Normal rework costs allocated to CS1 $1,200
Abnormal rework costs for C $1,080
Total rework costs $2,280
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