San Angelo Corp. uses a job order costing system for client contracts related to custom-manufactured pulley systems. Elmore Mechanical recently ordered 20,000 pulleys, and the job was assigned #BA468. Information for Job #BA468 revealed the following:
Direct material ...................$40,800
Direct labor ........................ 49,200
Overhead ........................... 36,800
Final inspection of the pulleys revealed that 230 were defective. In correcting the defects, an additional $1,150 of cost was incurred ($250 for direct material and $900 for direct labor). After the defects were corrected, the pulleys were included with the other good units and shipped to the customer.
a. Journalize the entry to record incurrence of the rework costs if San Angelo Corp.'s predetermined overhead rate includes normal rework costs.
b. Journalize the entry to record incurrence of the rework costs if rework is normal but specific to this job. If San Angelo Corp. prices jobs on a cost-plus basis, should the rework costs be considered in determining the markup?
c. Journalize the entry to record incurrence of the rework costs, assuming that all rework is abnormal.