Figure 5-9 Alpha Company manufactures customized motors on a job-order basis.Job 492 is an order for 100 units.It requires the following:
Direct materials $3,000
Direct labor ($10/hr) 1,000
Overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8 additional direct labor hours and $60 of materials.
-
Refer to Figure 5-9.If the spoilage was considered normal, what is the cost of job 492?

Question

Quizplus · Accepted Answer

Normal spoilage is considered a normal part of the production process and its cost is included in the cost of good units produced. Therefore, the 2 units that required rework and the associated cost of $60 of materials and 8 additional direct labor hours should be added to the cost of job 492. 
Direct materials: $3,000 
Direct labor: $1,000 + $80 (8 hrs x $10/hr for rework) = $1,080 
Overhead: 150% x $1,080 = $1,620 
Total cost of job 492: $3,000 + $1,080 + $1,620 + $60 (rework materials) = $5,760

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