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 $2,300 and direct labor of $500. Overhead is applied at the rate of 130 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 $800 and direct labor costing $500. 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

1. Calculation of the Cost of the Tramel Job

Particulars Amount

Direct material cost $2,300

Direct labor cost $500

Overhead applied $650 (500*130)

Total cost of job $3,450

2. Particulars Debit Credit

Overhead Cost $1,300

To materials $800

To Labour $500

3. The Cost of the Tramel Job will not be affected