FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Exercise III
boltsmann
3E Corporation manufactures products that often require specification
changes or modifications to meet its customers' needs. Still, 3E Corporation has
been able to establish a normal spoilage rate of 5% of normal input. Normal
spoilage is recognized during the budgeting process and classified as a component
of manufacturing overhead when determining the overhead rate.
lordw
tho
Abraham Bautista, one of 3E Corporation's inspection managers, obtains
the following information for Job No. 718 which was recently completed. A total
of 85,400 units were started, and 3,500 spoiled units were rejected at final
inspection, yielding 81,900 good units. Abraham Bautista indicates that all rejects
were related to this specific job. The completed units are delivered (sold on
account) just before the end of accounting year with 50% markup based on
manufacturing costs. Rejected units were sold on account at P5 per unit.
The total costs for all 85,400 units of Job No. 718 are as follows:
Direct materials
P 1,537,200
Direct nianufacturing labor
1,281,000
Manufacturing overhead
2,049,600
Total manufacturing costs.
P4,867,800
Required: 1. Compute the unit quantities of normal and abnormal spoilage.
2. Prepare the journal entries to account for Job No. 718.
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Transcribed Image Text:Exercise III boltsmann 3E Corporation manufactures products that often require specification changes or modifications to meet its customers' needs. Still, 3E Corporation has been able to establish a normal spoilage rate of 5% of normal input. Normal spoilage is recognized during the budgeting process and classified as a component of manufacturing overhead when determining the overhead rate. lordw tho Abraham Bautista, one of 3E Corporation's inspection managers, obtains the following information for Job No. 718 which was recently completed. A total of 85,400 units were started, and 3,500 spoiled units were rejected at final inspection, yielding 81,900 good units. Abraham Bautista indicates that all rejects were related to this specific job. The completed units are delivered (sold on account) just before the end of accounting year with 50% markup based on manufacturing costs. Rejected units were sold on account at P5 per unit. The total costs for all 85,400 units of Job No. 718 are as follows: Direct materials P 1,537,200 Direct nianufacturing labor 1,281,000 Manufacturing overhead 2,049,600 Total manufacturing costs. P4,867,800 Required: 1. Compute the unit quantities of normal and abnormal spoilage. 2. Prepare the journal entries to account for Job No. 718.
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