Reference no: EM132640678

Third Corp. manufactures rocking chairs made of round steel bars and woven plastic strips (similar to woven rattan strips). The steel bars are cut, heated and bent before they are connected by bolts and nuts to form the desired structures. The woven plastic strips are subsequently attached per specifications.

For the current period, estimated factory overhead (without the corresponding provision for any imperfection) is P90,000 based on estimated direct labor cost of P180,000. Per estimates, a 5% spoilage may be expected.

For January, the company processed an order for 10 rocking chairs (job no. 027). The prime costs are as follows:

Direct materials P30,000

Direct labor 15,000

Upon final inspection, two rocking chairs are found below standard. Estimated cost recovery is P2,000 per chair.

QUESTION:

Problem a. Assuming that the job is a regular or standard one,

[1] What must be the unit cost for the remaining eight rocking chairs upon completion and what are the entries to take up the original production cost, spoilage, and completion of the remaining units? (Use three work in process accounts.)

Problem b. Assuming that the job is as a special one,

[1] What factory overhead rate must be used, the unit cost for the remaining eight rocking chairs upon completion and the entries to take up the original production cost, spoilage, and completion of the remaining units? (Use three work in process accounts.)