Cost of Normal Spoilage Caused by Nature of Job Frieling Company installs granit
ID: 2556851 • Letter: C
Question
Cost of Normal Spoilage Caused by Nature of Job 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 $3,000 and direct labor of $800. Overhead is applied at the rate of 150 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 $1,500 and direct labor costing $1,200. Assume that the spoilage was due to the inherently fragile nature of the piece of stone picked out by the Tramels. Frieling had warned them that the chosen piece could require much more care and potentially additional work. As a result, Frieling considers this spoilage to be caused by the Tramels' job.
Required:
1. Calculate the cost of the Tramel job. $
2. Does a journal entry to the overhead control account need to be made? No
3. What if the additional rework required $2,400 of direct labor? What would be the effect on the cost of the Tramel job? If the additional rework required $2,400 of direct labor rather than $1,200, then the total cost of the Tramel job would increase by $ to $.
Explanation / Answer
1) Direct materials 3000 Direct labor 800 overhead (150% of direct labor) 1200 5000 Add: additional rework cost Direct materials 1500 Direct labor 1200 overhead (150% of direct labor) 1800 Cost of tramel Job 9500 2) No journal entry required to be made for overhead control account 3) Tramel job cost would increase by the amount of direct labor and therby the overhead Direct materials 3000 Direct labor 800 overhead (150% of direct labor) 1200 5000 Add: additional rework cost Direct materials 1500 Direct labor 2400 overhead (150% of direct labor) 3600 Cost of tramel Job 12500 Tramel job would increase by 9500 to 12500