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Which journal entries correctly records the cost

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Reference no: EM133079393

Question - Massive Menus custom designs and prints menus based on individual restaurant owners' needs and a set of standardized options. The company uses job costing to record and control costs. Yesterday, one of the company's paper cutting machines broke down while working on a job for a client. The client ordered the premium option on the menus, and the production manager's adjustment of the cutting machine caused the knife to dull prematurely, ruining 600 out of 6,000 menus for a major restaurant chain. Total cost of the order was:

Direct materials $14,500

Direct labour $12,450

Overhead $9,800

The customer agreed to have the price of the original order reduced to accommodate the reduction in quantity delivered, and the spoiled cards were destroyed. Assuming normal spoilage is 10% of production for the premium option, which of the following journal entries correctly records the cost of the spoiled menus for this job?

a) No entry required

b) DR Work-in-process 3,675 CR Manufacturing overhead control 3,675

c) DR Manufacturing overhead control 2,695 CR Work-in-process 2,695

d) DR Spoilage 3,675 CR Work-in-process 3,675

Reference no: EM133079393

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