Question:
Spoiled work
Venus, Inc., manufactures tennis clothing. During the month, the company cut and assembled 8,000 skirts. One hundred of the skirts did not meet specifications and were considered ‘‘seconds.'' Seconds are sold for $9.95 per skirt, whereas first-quality skirts sell for $39.95. During the month, Work in Process was charged $108,000: $36,000 for materials, $48,000 for labor, and $24,000 for factory overhead. Record the entries to first charge production costs for the period and to then record the loss due to spoiled work, under each of the following conditions:
a. The loss due to spoiled work is spread over all jobs in the department.
b. The loss due to spoiled work is charged to the specific job because it is a special order.