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?

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?

Quizplus · Accepted Answer

The total cost of producing 100 units without rework is:
Direct Materials cost = $5,000
Direct Labor cost = (60 + 900) = $9600
Manufacturing Overhead cost = (9600 x 2) = $19,200
Total Cost = $5,000 + $9,600 + $19,200 = $33,800

Since 2 units required rework which is considered abnormal spoilage, the cost of rework should be treated as a loss and should not be included in the cost of job 492. Therefore, the total cost of job 492 is $33,800. However, since the question is asking for the cost of job 492 after considering abnormal spoilage, the answer would be to subtract the cost of rework from total cost of job 492 ($33,800 - $60 - 8 x $15 = $5,760).

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