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How journalize the entry for the spoilage for ayala company

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Reference no: EM132664972

Ayala Company produces a variety of products used in the painting processes of auto manufacturers. With each batch of chemicals produced, some spoilage naturally occurs. Ayala Company includes normal spoilage cost in its predetermined OH rate.

For 2019, Ayala Company estimated the following:

Overhead costs, other than spoilage P600,000
Estimated spoilage cost 50,000
Estimated sales value of spoiled materials 20,000
Estimated direct labor hours 40,000

Problem a. Ayala Company applies overhead based on direct labor hours. Calculate the predetermined OH rate for 2019.

Problem b. For a batch of chemicals mixed in May 2019, the firm experienced normal spoilage on Job #111. The cost of the spoiled material amounted to P1,730 and Ayala Company estimated the salvage value of those materials to be P496. Journalize the entry for the spoilage.

Reference no: EM132664972

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