Accounting for Spoiled Work. The Galarde Manufacturing Co. produces a variety of products, each requiring several parts. The parts are manufactured and placed in stock for assembly as needed. The following cost sheet for Part No. 105 indicates the present costing method.
For Part No. —- – 1 – 05
Quantity started — – 2 – , 0 – 00
Quantity finished _
COST SHEET
Job Order No. 6-5574
Date started 2/5/- Date wanted 2/28/-
–_;
;_–
Quantity spoiled _
Date finished 2/26/-
Materials:
2,000 pieces Material Stock No. 81 (all material issued
at beginning of job). . . . . . . . . . . . . . .. .. .. . .. . . . $4,000
Labor Cost:
Pieces
Pieces
Labor
Dept.
Operator
Started
Finished
Cost
21
3
2,000
1,990
$ 400
21
7
1,990
1,975
597
21
9
1,975
1,960
395
$1,392
23
14
1,960
1,955
784
23 17 1,955 1,940 ~
1,957
3,349
Total labor cost …………………………..
Factory Overhead:
Dept.
21
23
Rate
100%
200%
1,392
3,914
Total factory overhead. . . . . . . . . . . . . . . . . . . . . . . . . . 5,306
Total cost $12,655
Unit price of 1,940 pieces $6.52
The spoiled parts are placed in a pile, and at intervals the parts are sold. At the time of sale an entry is made debiting Cash and crediting Sale of Spoiled Parts. On the income statement, the sale of spoiled parts is shown as Miscella- neous Income.
Required: (1) Recalculation of the cost of the good parts and the spoiled work cost for each department, assuming each spoiled part has a scrap value of $1.
(2) The journal entries to be made at the time Job Order No. 6-5574 is com- pleted. Assume the spoilage is to be charged to total production.
(3) The information contained in a monthly spoilage report that is sent to the department foremen.