60.1K

Verified Solution

Link Copied!

Richport Company manufactures products that often require specification changes or modifications to meet customer needs. Consequently, Richport employs a job costing system for its operations.

Although the specification changes and modifications are commonplace, Richport has been able to establish a normal spoilage rate of 2.5% of total units produced (before spoilage is identified). The company recognizes normal spoilage during the budgeting process and classifies it as a component of factory overhead. Thus, the predetermined overhead rate used to apply factory overhead costs to jobs includes an allowance for net spoilage cost for normal spoilage. If spoilage on a job exceeds the normal rate, it is considered abnormal and must be analyzed. The cause of the spoilage must then be submitted to management.

Randa Duncan, one of Richports inspection managers, has been reviewing the output of Job N1192-122 that was recently completed. A total of 148,030 units had been started for the job, and 8,800 units were rejected at final inspection, meaning that the job yielded 139,230 good units.

Randa noted that 980 of the first units produced were rejected due to a very unusual design defect that was corrected immediately; no more units were rejected for this reason.

Randa was unable to identify a pattern for the remaining 7,820 rejected units. They can be sold at a salvage value of $8 per unit.

The total costs accumulated for all 148,030 units of Job N1192-122 follow. Although the job is completed, all of these costs are still in the Work-in-Process Inventory account (i.e., the cost of the completed job has not been transferred to the Finished Goods Inventory account).

Direct materials	$ 2,415,000
Direct labor	1,962,000
Applied factory overhead	4,060,710
Total cost of job	$ 8,437,710

3. Review the results and costs for Job N1192-122:

a. Determine the normal input required to yield 139,230 good units.

b. Prepare an analysis separating the spoiled units into normal and abnormal spoilage.

c. Prepare the appropriate journal entries to account for Job N1192-122.

3a. Determine the normal input required to yield139,230 good units.

3b. Prepare an analysis separating the spoiled units into normal and abnormal spoilage.

	Normal spoilage 7,820selected answer incorrect Abnormal spoilage: Design defect not attempted Other not attempted not attempted Total units rejected not attempted

3c.Prepare the appropriate journal entries to account for Job N1192-122. (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

No	Transaction	General Journal	Debit	Credit

a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet Record the entry for the disposal of the spoiled inventory. a transaction/event, select "No journal entry required" in the first account field. Journal entry worksheet 1 Record the entry to account for the abnormal spoilage. Note: Enter debits before credits. normal spoilage rate of 2.5% of total units produced (before spoilage is identifled). The company recognizes normal spollage during the budgeting process and classifies it as a component of factory overhead. Thus, the predetermined overhead rate used to apply factory overhead costs to jobs includes an allowance for net spoilage cost for normal spoilage. If spoilage on a job exceeds the normal rate, it is considered abnormal and must be analyzed. The cause of the spollage must then be submitted to management. Randa Duncan, one of Richport's inspection managers, has been reviewing the output of Job N1192-122 that was recently completed. A total of 148,030 units had been started for the job, and 8,800 units were rejected at final inspection, meaning that the job yielded 139,230 good units. Randa noted that 980 of the first units produced were rejected due to a very unusual design defect that was corrected immediately; no more units were rejected for this reason. Randa was unable to identify a pattern for the remaining 7,820 rejected units. They can be sold at a salvage value of $8 per unit. The total costs accumulated for all 148,030 units of Job N1192-122 follow. Although the job is completed, all of these costs are still in the Work-in-Process Inventory account (i.e, the cost of the completed job has not been transferred to the Finished Goods Inventory account). Prepare an analysis separating the spoiled units into normal and abnormal spoilage. 3. Review the results and costs for Job N1192-122: a. Determine the normal input required to yield 139,230 good units. b. Prepare an analysis separating the spoiled units into normal and abnormal spoilage. c. Prepare the appropriate journal entries to account for Job N1192-122. Complete this question by entering your answers in the tabs below. Determine the normal input required to yield 139,230 good units. 2. Distinguish among spoiled units, rework units, and scrap. Required information [The following information applies to the questions displayed below.] Richport Company manufactures products that often require specification changes or modifications to meet customer needs. Consequently, Richport employs a job costing system for its operations. Although the specification changes and modifications are commonplace, Richport has been able to establish a normal spoilage rate of 2.5% of total units produced (before spoilage is identified). The company recognizes normal spollage during the budgeting process and classifieshit as a component of factory overhead. Thus, the predetermined overhead rate used to apply factory overhead costs to jobs includes an allowance for net spoilage cost for normal spollage. If spoliage on a job exceeds the normal rate, it is considered abnormal and must be analyzed. The cause of the spoilage must then be submitted to management. Randa Duncan, one of Richport's inspection managers, has been reviewing the output of Job N1192-122 that was recently completed. A total of 148,030 units had been started for the job, and 8,800 units were rejected at final Inspection, meaning that the job yleided 139,230 good units. Randa noted that 980 of the first units produced were rejected due to a very unusual design defect that was corrected immediately; no more units were rejected for this reason. Randa was unable to identify a pattern for the remaining 7,820 rejected units. They can be sold at a salvage value of Required: 1. Explain the distinction between normal and abnormal spoilage

Answer & Explanation Solved by verified expert

See Answer