SPOILED GOODS – JOB ORDER COSTING

1. P Foundry Inc. manufactures custom metal

products that require casting, such as engine
blocks, pistons, and engine housing. During the
current period, an order for 5,000 custom housing
was begun on job number 3387 for R Pump Company.
After the job was completed, the housings were
inspected and 200 units were determined to be
defective. The customer has agreed to accept the
order with only 4,800 units instead of the quantity
originally ordered. The spoiled units can be sold
as seconds for P15 each. Spoiled goods are kept in
a inventory account separate from finished goods.
Costs charged to job number 3387 are:
​ ​Materials ​ ​ ​ ​ ​ ​ ​P46,000
​ ​Labor (1,000 hours X P14 per hour) ​ ​
14,000
​ ​Factory overhead (P30 per labor hour) ​ ​
30,000
Required:
1. Assuming that the defective units are the result
of an internal failure (that is, an employee error
or a machine failure), prepare the appropriate
general journal entry to record the transfer of the
defective units to Spoiled Goods Inventory and
shipment of job number 3387 to the customer.

2. Assuming that the defective units are the result

of a change in design of specified by the customer
after the units completed, prepare the appropriate
general journal entry to record the transfer of the
defective units to Spoiled Goods Inventory and
shipment of job number 3387 to the customer.

2. Troy Cabinet Co. manufactures custom cabinets

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 for modular and prefabricated housing companies.
During the current period, an order for 1,000
custom cabinets was begun on job number 89621 for
Baggy Housing Corp. Custom jobs are marked up 150
percent of cost. Costs charged to job number 8962
are:
Materials ​ ​ ​ ​ ​ ​ ​P92,000
​ ​Labor (3,000 hours X P12 per hour) ​ ​
36,000
​ ​Factory overhead (P24 per labor hour) ​ ​
72,000
On inspection, 100 of the cabinets were found to
have defects. Materials costing P4 and 1/2 hour of
labor are required to correct each defective unit.
Factory overhead is charged to production on the
basis of direct labor hours.

Required: Prepare the appropriate general journal

entries assuming that spoilage were cause by (a)
internal failure, (b) change in the specification
made by customer.

3. F Company had a production run of 8,000 pairs of

slacks during the last week of June, at the
following costs per pair:
​Materials ​ ​ ​ ​ ​ ​ ​ ​ ​ ​P50.0
0
​Labor ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 40.00
​Factory overhead (includes P7 allowance for
spoiled work) ​ 30.00
Final inspection revealed 600 pairs not meeting
quality standard, salable as seconds at P40.00 per
pair.

Required:
1. Prepare the journal entries assuming the loss
are charged to the production run.

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 2. Prepare the journal entries assuming the loss
are to be charged to all production run.

8. Fabricators manufacture jacks and other lifting

equipment. One order from A Supply House for 1,000
jacks showed the following costs per unit:
materials, P40.00; labor, P17.50; factory overhead
applied at 160% of direct labor cost (150% in cases
in which any defective unit costs are to be charged
to a specific order.)
Final inspection revealed that 75 of the units were
improperly riveted. Correction of each defective
unit requires P2.00 for materials, P3.00 for labor,
and factory overhead at the appropriate rate.

Required:
1. Assume the order is charged with the cost of
defective work, prepare necessary journal entries
in the books.
2. Assume the cost of correcting the defective work
is not charged to the specific order, prepare the
necessary journal entries in the books.

https://cdn.fbsbx.com/v/t59.2708-21/70504966_5462528028…=8ed0b93b6ea953740699553b69ef9a8f&oe=5D94EC77&dl=1 01/10/2019, 11H39 AM

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