Reference no: EM132924008

Question - APL manufactures athletic clothing, including shoes. Because of strict production specifications, the manufacturing department often has spoiled items. If the spoiled items are less than or equal to 5 percent of a job's total then the items are treated as normal spoilage. During March job #101 for 100 pairs of shoes had 7 spoiled items. The spoiled items were detected immediately before they were packaged. The marketing manager believes the spoiled items can be sold for $20 each. They had a cost at point of detection of $75 each. These costs included $25 for direct manufacturing labour, $45 for direct materials, and $5 for factory overhead.

Required -

1. Make the necessary journal entry, or entries, to record the spoiled units. If the spoilage is normal it is assigned to an overhead control account. Assume the spoiled units can be sold for $20 each.

2. Make the necessary journal entry, or entries, to record the rework cost. If the spoilage is normal it is assigned to an overhead control account. Assume the spoiled units can be reworked for $20 each: direct materials $5; labor $12; manufacturing overhead $3.