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D Company produces a variety of products used in the painting processes of auto manufacturers. With each batch of chemicals produced, some spoilage naturally occurs. D Company includes normal spoilage cost in its predetermined OH rate.
For 2019, D Company estimated the following:
Overhead costs, other than spoilage P600,000Estimated spoilage cost 50,000Estimated sales value of spoiled materials 20,000Estimated direct labor hours 40,000
Problem a. D 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 D Company estimated the salvage value of those materials to be P496. Journalize the entry for the spoilage.
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