Figure 5-9 The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.
Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the cost of job 492?
A) $5,500
B) $5,760
C) $3,140
D) $5,640

Question

Figure 5-9 The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following:
 After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.
Refer to Figure 5-9. If the rework is considered abnormal spoilage, what is the cost of job 492?
A) $5,500 
B) $5,760 
C) $3,140 
D) $5,640

Quizplus · Accepted Answer

The cost of job 492 can be calculated as follows:
Direct materials cost = 100 units x $80 = $8,000
Direct labor cost = 100 units x 10 hours x $15 per hour = $15,000
Total manufacturing overhead cost = 100 units x $45 = $4,500
Total cost before rework = $8,000 + $15,000 + $4,500 = $27,500
Cost of rework = $60 + (8 hours x $15 per hour) = $180
Total cost after rework = $27,500 + $180 = $27,680
Since the rework is considered abnormal spoilage, it should be treated as a period cost and not included in the cost of job 492. Therefore, the cost of job 492 is $27,500. The closest option is B, $5,760, which is not correct. The correct answer is A, $5,500.

Figure 5-9 the Omega Company Manufactures Customized Motors on a Job-Order