Question:
Spoilage and job costing. (L. Bamber) Bamber Kitchens produces a variety of items in accordance with special job orders from hospitals, plant cafeterias, and university dormitories. An order for 2,500 cases of mixed vegetables costs $6 per case: direct materials, $3; direct manufacturing labor, $2; and manufacturing overhead allocated $1. The manufacturing overhead rate includes a provision for normal spoilage. Consider each requirement independently.
1. Assume that a laborer dropped 200 cases. Suppose part of the 200 cases could be sold to a nearby prison for $200 cash. Prepare a journal entry to record this event Calculate and explain briefly the unit cost of the remaining 2,300 cases.
2. Refer to the original data. Tasters at the company reject 200 of the 2,500 cases. The 200 cases are disposed of for $400. Assume that this rejection rate is considered normal. Prepare a journal entry to record this event, and:
a. Calculate the unit cost if the rejection is attributable to exacting specifications of this particular job.
b. Calculate the unit cost if the rejection is characteristic of the production process and is not attributable to this specific job.
c. Are unit costs the same in requirements 2a and 2b? Explain your reasoning briefly.
3. Refer to the original data. Tasters rejected 200 cases that had insufficient salt. The product can be placed in a vat salt can be added, and the product can be reprocessed into jars. This operation, which is considered normal, will cost $200. Prepare a journal entry to record this event and:
a. Calculate the unit cost of all the cases if this additional cost was incurred because of the exacting specifications of this particular job.
b. Calculate the unit cost of all the cases if this additional cost occurs regularly because of difficulty in seasoning.
c. Are unit costs the same in requirements 3a and 3b? Explain your reasoning briefly.