Concept explainers
The total costs for all 128,500 units of Job No. M102 follow. The job has been completed, but the costs are yet to be transferred to Finished Goods.
Direct materials | $ 979,000 |
Direct manufacturing labor | 840,000 |
Manufacturing overhead | 1,650,500 |
Total |
$3,469,500 |
- 1. Calculate the unit quantities of normal and abnormal spoilage.
Required
- 2. Prepare the
journal entries to account for Job No. M102, including spoilage, disposal of spoiled units, and transfer of costs to the Finished Goods account. - 3. Flextron’s controller, Vince Chadwick, tells Marta Suarez, the
management accountant responsible for Job No. M102, the following: “This was an unusual job. I think all 6,000 spoiled units should be considered normal.” Suarez knows that the work involved in Job No. M102 was not uncommon and that Flextron’s normal spoilage rate of 2% is the appropriate benchmark. She feels Chadwick made these comments because he wants to show a higher operating income for the year.- a. Prepare journal entries, similar to requirement 2, to account for Job No. M102 if all spoilage were considered normal. How will operating income be affected if all spoilage is considered normal?
- b. What should Suarez do in response to Chadwick’s comment?
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HORNGRENS COST ACCOUNTING W/ACCESS
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