TPM Corporation's accounting information system showed a balance for Job 405 of $1,700. The job can be reworked at a cost of $150 and sold for $2,000, or sold "as is" for $1,800.
a)Should TPM rework the job or sell it as is? Justify your answer with appropriate computations.
b)Assume TPM reworks the job. Write out the journal entry to record the sale of Job 405 (assume the rework cost has already been appropriately recorded).
c)Assume TPM does not rework the job. Write out the journal entry to record the sale of Job 405.
d)Suppose the spoilage on this job was caused by raw material defects. TPM's managers are thinking about hiring an employee to inspect raw materials before they are placed in production. Identify one argument in favour and one argument against this idea.

Question

Quizplus · Accepted Answer

The Answer of TPM Corporation's accounting information system showed a balance for Job 405 of $1,700. The job can be reworked at a cost of $150 and sold for $2,000, or sold "as is" for $1,800.
a)Should TPM rework the job or sell it as is? Justify your answer with appropriate computations.
b)Assume TPM reworks the job. Write out the journal entry to record the sale of Job 405 (assume the rework cost has already been appropriately recorded).
c)Assume TPM does not rework the job. Write out the journal entry to record the sale of Job 405.
d)Suppose the spoilage on this job was caused by raw material defects. TPM's managers are thinking about hiring an employee to inspect raw materials before they are placed in production. Identify one argument in favour and one argument against this idea.

TPM Corporation's Accounting Information System Showed a Balance for Job