Reference no: EM132714330

Question -

Q1. B Company uses a job order costing system. One Company ordered 20,000 units of the product produced by B company and the job was assigned no. B100. Information for Job B100 revealed the following:

Direct Materials P40,800

Direct Labor 49,200

Overhead 36,800

Final inspection of the products revealed that 230 units were defective. In correcting the defects, an additional P1,150 of cost was incurred (P250 for direct material and 900 for direct labor). After the defects were corrected, the units were included with the other good units and shipped to the customer.

a. Journalize the entry to record incurrence of the rework costs if B Company's predetermined overhead rate includes normal rework costs.

b. Journalize the entry to record incurrence of the rework costs if rework is normal but specific to this job. If B Company prices jobs on a cost plus basis, should the rework costs be considered in determining the mark up?

c. Journalize the entry to record incurrence of the rework costs, assuming that all rework is abnormal.

Q2. 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 P600,000

Estimated spoilage cost 50,000

Estimated sales value of spoiled materials 20,000

Estimated direct labor hours 40,000

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

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.