Question

Cambria Company estimated it would have $400,000 in manufacturing overhead costs this period, which it allocates to jobs on the basis of direct labor hours, which were estimated to be 5,000 hours this period. Cambria spends $15.00 per hour on direct labor and $100.00 per unit on direct materials. During the period, Job 4100 (for 300 units) required 150 direct labor hours. After inspecting the job, Cambria’s customer requested that the handle on the units be replaced, which cost Cambria $11,000. Of the 300 units produced, 10 were discarded as normal spoilage because of routine problems in the manufacturing process. An additional 5 units had to be repaired at a cost of $250 (total) after they were damaged by a piece of falling equipment.

Calculate each of the following:

The company’s predetermined manufacturing overhead rate

Dollars

The cost of the job before considering spoilage and rework

Dollars

The cost of any normal spoilage arising from the job

Dollars

The cost of any abnormal spoilage arising from the job

Dollars

The cost of any spoilage due to customer rejection arising from the job

Dollars

The cost of any normal rework arising from the job

Dollars

The cost of any abnormal rework arising from the job

Dollars

The cost of any customer-requested rework arising from the job

Dollars

The amount of spoilage and rework cost from the job that should be added to manufacturing overhead

Dollars

The amount of spoilage and rework cost from the job that should be added to a loss account

Dollars

The cost of the job after considering spoilage and rework

Dollars

Answer 1

1	MANUFACTURING OVERHEADS RATE
	ESTIMATED OVERHEADS	400000
	DIRECT LABOR HOURS	5000
	RATE PER HOUR	400000 /5000
	OVERHEADS ABSORPTION RATE PER HOUR	80
	DIRECT LABOR RATE PER HOUR	15
	DIRECT MATERIAL COST PER UNIT	100
	JOB 4100
	UNITS PRODUCED GOOD	300
	NORMAL LOSS	10
	TOTAL	310
	REQUIRED LABOR HOURS	150

2	COST FOR THE JOB
	DIRECT MATERIAL	100*310	31000
	DIRECT LABOR	150*15	2250
	OVERHEADS CHARGED	150*80	12000
	TOTAL COST OF 300 GOOD UNITS		45250
3	COST OF NORMAL SPOILAGE
	TOTAL COST FOR 310 UNITS	45250
	COST OF NORMAL SPOILED 10 UNITS	(45250/310)*10	1459.677419
4	ABNORMAL SPOILAGE
	TOTAL COST OF 300 UNITS	43790
	COST OF ABNORMAL SPOILAGE UNITS 5	(43790/300)*5	729.8333333
	COST OF 295 GOOD UNITS	(43790/300)*295	43060.16667
			43790
5	COST OF SPOILAGE DUE TO CUSTOMER REJECTION
	REPLACEMENT OF HANDLE	11000
	COST OF ABNORMAL SPOILAGE	754
6	COST OF NORMAL REWORK
	NORMAL SPOILED UNITS DISCARDED
	SO NILL REWORK COST
7	COST OF ABNORMAL REWORK
	REWORKED UNITS	5
	REWORK COST	250
8	CUSTOMER REQUESTED REWORK COST	11000
	ADDITIONAL SPOILED UNITS REWORKED	250
	TOTAL	11250
9	AMOUNT OF SPOILAGE AND REWORK TO BE ADDED TO MANUFACTURING OVREHEADS ACCOUNT
	COST OF NORMAL SPOILAGE	1459.677419
	TO BE CHARGED TO OVERHEADS
10	AMOUNT OF SPOILAGE AND REWORK TO BE CHARGED TO LOSS ACCOUNT
	COST OF ABNORMAL SPOILAGE	729.8333333
	COST OF REWORK	250
11	COST OF THE JOB
	DIRECT MATERIALS	30000
	DIRECT LABOR	2250
	DIRECT OVERHEADS	12000
	TOTAL	44250
	REPLACEMENT OF HANDLE	11000
	TOTAL	55250
	REPAIR AND REWORK COST ARE NOT CHARGED TO CUSTOMER AS IT INCURRED DUE TO OUR FAILURE AND SPOILAGE
	WHILE REPLACEMENT OF HANDLE IS ON REQUEST OF CUSTOMER WHICH OTHERWISE WAS NOT REQUIRED TO INCURR, THAT’S WHY CHARGED TO CUSTOMER