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Whitefish machine Shop: Spoilage in job costing

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See attached file.

P18-35
Whitefish Machine Shop is a manufacturer of motorized carts for vacation resorts.

Peter Cruz, the plant manager of Whitefish, obtains the following information for Job #10 in August 2007. A total of 40 units were started, and 5 spoiled units were detected and rejected at final inspection, yielding 35 good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection point are $1,000 per unit. The current disposal price of the spoiled units is $220 per unit. When the spoilage is detected, the spoiled goods are inventoried at $200 per unit.

Answer the following in excel:

1) What is the normal spoilage rate?
2) Prepare the journal entries to record the normal spoilage, assuming:
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

P18-36 (continuation of 18-35)

Assume that the 5 spoiled units of Whitefish Machine shop's Job #10 can be reworked for a total of $1,800. A total cost of $5,000 associated with these units has already been assigned to Job #10 before the rework.

1) Prepare the journal entries to for the rework,assuming:
a. The rework is related to a specific job
b. The rework is common to all jobs
c. The rework is considered to be abnormal

P18-37 (continuation of 18-35)

Assume that Job #10 of Whitefish Machine Shop generates normal scrap with a total sales value of $300 (it is assumed that the scrap returned to the storeroom is sold quickly)

1) Prepare the journal entries for the recognition of scrap, assuming
a. The value of scrap is immaterial and scrap is recognized at the time of sale.
b. The value of scrap is material, is related to a specific job and is recognized at the time of sale
c. The value of scrap is material, is common to all jobs and is recognized at the time of sale
d. The value of scrap is material, scrap is recognized as inventory at the time of production and is recorded at its net realizable value

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Solution Summary

Your tutorial is in Excel with each problem on a separate tab. Some notes are added to indicate the rule for each condition.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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