Question

Jellyfish Machine Shop is a manufacturer of motorized carts for vacation resorts. Patrick Cullin, the plant manager of Jellyfish, obtains the following information fo r Job # 10 in August 2014. A total of 46 units were started, and 6 spoiled units were detected and rejected at the final inspection, yielding 40 good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection poi nt are $1,100 per unit. The current disposal price of the spoiled units is $235 per unit. When the spoilage is detected, the spoiled goods are inventoried at $235 per unit. Answer the following questions: 1. What is the normal spoilage rate? 2. Prepare the jo urnal entries to record the normal spoilage, assuming the following: a. The spoilage is related to a specific job. b. The spoilage is common to all jobs. c. The spoilage is considered to be abnormal spoilage.

Answer 1

Answer:

1.The normal spoilage rate is 15%

2.a The journal entry to record the normal spoilage, assuming  The spoilage is related to a specific job is the following:

Material Control A/c Dr. $ 1,410  

                                  To Work in progress control (Job # 10) A/c Cr. $ 1,410

b.   The journal entry to record the normal spoilage, assuming The spoilage is common to all jobs is the following:

Material Control A/c Dr. $ 1,410        

Manufacturing overhead control A/c Dr. $ 5,190

                 To Work in progress control (Job # 10) A/c Cr. $ 6,600

c. The journal entry to record the normal spoilage, assuming The spoilage is considered to be abnormal spoilage is the following:

Material Control A/c Dr. $ 1410        

Loss from Abnormal spoilage A/c Dr. $ 5190

                             To Work in progress control (Job # 10) A/c Cr. $ 6600  

Explanation:

1.In ordert to calculate the normal spoilage rate we would have to use the following formula:

normal spoilage rate= (6 spoiled units / 40 good units)

= 0.15

= 15%

The normal spoilage rate is 15%

2.a Material Control A/c= 6 spoiled units * 235 per unit=$ 1,410, Therefore, the journal entry to record the normal spoilage, assuming  The spoilage is related to a specific job is the following:

Material Control A/c Dr. $ 1,410  

                                  To Work in progress control (Job # 10) A/c Cr. $ 1,410    

b. Material Control A/c= 6 spoiled units * 235 per unit=$ 1,410

Manufacturing overhead control A/c= [6 spoiled units * ($1,100 - $235) per unit]=$ 5,190, Therefore, the journal entry to record the normal spoilage, assuming The spoilage is common to all jobs is the following:

Material Control A/c Dr. $ 1,410        

Manufacturing overhead control A/c Dr. $ 5,190

                 To Work in progress control (Job # 10) A/c Cr. $ 6,600    

c. Material Control A/c= 6 spoiled units * 235 per unit=$ 1,410

Loss from Abnormal spoilage A/c=[6 spoiled units * ($1,100 - $235) per unit]=$ 5,190, Therefore, the journal entry to record the normal spoilage, assuming The spoilage is considered to be abnormal spoilage is the following:

Material Control A/c Dr. $ 1410        

Loss from Abnormal spoilage A/c Dr. $ 5190

                             To Work in progress control (Job # 10) A/c Cr. $ 6600