Reference no: EM132717043

Question - 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.

Required -

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.