Question:
Spoilage in job costing. Crystal Clear Machine Shop is a manufacturer of motorized carts for vacation resorts. Peter Cruz, the plant manager of Crystal Clear, obtains the following information for Job #10 in August 2010. A total of 32 units were started, and 7 spoiled units were detected and rejected at final inspection, yielding 25 good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection point are $1,450 per unit. The current disposal price of the spoiled units is $230 per unit. When the spoilage is detected, the spoiled goods are inventoried at $230 per unit.
Required
1. What is the normal spoilage rate?
2. Prepare the journal entries to record the normal spoilage, assuming the following:
a. The spoilage is related to a specific job.
b. The spoilage is common to all jobs.
c. The spoilage is considered to be abnormal spoilage.