Bubbles’ Cart Shop is a manufacturer of motorized carts for vacation resorts. Mr

Question

Bubbles’ Cart Shop is a manufacturer of motorized carts for vacation resorts. Mr. Lahey, the plant manager of Bubbles’ Cart Shop, obtains the following information for Job #10 in August 2014. A total of 26 units were started, and 6 spoiled units were detected and rejected at final inspection, yielding 20 good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection point are $1,050 per unit. The current disposal price of the spoiled units is $200 per unit. When the spoilage is detected, the spoiled goods are inventoried at $200 per unit.

Requirements

1. What is the normal spoilage rate?

2. Prepare the journal entries to record the normal spoilage, assuming the following:

a. The spoilage is related to a specific job.

b. The spoilage is common to all jobs.

c. The spoilage is considered to be abnormal spoilage.

*show work/formula please

Explanation / Answer

SOLUTION

1. Normal spoilage rate= Units of normal spoilage / Total good units completed

= 6 / 26 = 30%

2a. Journal entry for spoilage related to a specific job:

Note: The costs incurred on the bad units (6 * $1,050) are already part of the balance in WIP. The cost of the 20 good units is (20 * 1,050) + (6 * $850) = $26,100

2b. Journal entry for spoilage common to all jobs:

Note: In developing the predetermined O/H rate, the budgeted manufacturing overhead would include expected normal spoilage costs.

2c. Journal entry for abnormal spoilage

Note: If the spoilage is abnormal, the net loss is highlighted and always charged to an abnormal loss account

Materials Control (spoiled goods at current disposal value) (6 * $200) 1,200   Work-in-Process Control 1,200

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.