Question

Cost of Normal Spoilage

Frieling Company installs granite countertops in customers' homes. First, the customer chooses the particular granite slab, and then Frieling measures the countertop area at the customer's home, cuts the granite to that shape, and installs it. The Tramel job calls for direct materials of $1,900 and direct labor of $500. Overhead is applied at the rate of 140 percent of direct labor cost. Unfortunately, one small countertop breaks during installation and Frieling must cut another piece and install it to properly complete the job. The additional rework required direct materials costing $400 and direct labor costing $100. Assume that the spoilage was due to carelessness by a Frieling worker and it is considered to be normal spoilage.
Required:
1. Calculate the cost of the Tramel job.
2. Make any needed journal entry to the overhead control account.
3. What if the additional rework required $200 of direct labor? What would be the effect on the cost of the Tramel job?

Answer 1

See below

Step-by-step explanation:

1. Cost of the Tramel Job

= Direct material cost + Direct labor cost + Overhead applied

= $1,900 + $500 + (140% × $500)

= $1,900 + $500 + $700

= $3,100

2. Journal entry to record the overhead cost

Overhead cost account Dr $500

To Material account Cr $400

To Labor account Cr $100

3. Effect of additional rework required $200 of direct labor on the cost of Tramel job

= Direct material cost + Direct labor cost + Overhead applied

= $1,900 + ($500 + $200) + (140% × $500)

= $1,900 + $700 + $700

= $3,300

The effect of additional rework required of $200 of direct labor cost is an increase of $200 on the cost of job for Tramel