Chapter 04 – Job Costing
4-48 (continued -6)
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Chapter 04 – Job Costing
4-48 (continued -7)
6. When you look at the pivot table you can see that it has summed
up left-to-right, and top-to-bottom. This data is the same as the
information given in parts a and b of the self-study problem.
7. The drop-down boxes within the pivot table allow you to modify
what data will be shown within the pivot table. Select the drop-
down box for Purchased Products and select only “Material X.” As
you can see below, this changed your pivot table to only show data
relevant to “Material X.”
8. To change the format of the data within the pivot table is the same
as changing the data of a normal cell. You can select from the
formatting shortcut box, or you can right click on each, or all by
selecting all the cells, and selecting Format cells… Format your
numbers into this format 2,222.
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Chapter 04 – Job Costing
4-48 (continued -8)
9. Your final result should look like the pivot table below:
For an explanation of a free Microsoft Add-in that enhances the
capabilities of pivot tables, see Jeff Lenning, “Pivotal Advance
Boosts Excel’s Power,” Journal of Accountancy, September 2011, pp
40-44.
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Chapter 04 – Job Costing
4-49 Application of Overhead; Schedule of Cost of Goods
Manufactured (40 min)
4-44
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Chapter 04 – Job Costing
4-49 (continued -1)
4-45
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Chapter 04 – Job Costing
4-50 Application of Overhead; Ethics (20 min)
The management accountant should keep the Institute of Management
Accountants’ Statement of Ethical Professional Practice in mind. First, he or
she should try to persuade other pilot project members and the company
controller to strongly recommend that top management adopt the more
accurate departmental overhead rate method. If the company top
management does not comply, the management accountant should report
the situation to the company’s audit committee.
4-51 Operation Costing(30 Min)
1. Cost per pound:
Raw Sweet Corn: $5,200 / 800 lbs= $6.50/lb
Raw Regular Corn: $2,450 / 700 lbs= $3.50/lb
Total pounds for separating and cleaning depts. 800 + 700 = 1,500
Total pounds for Creaming Department 700
Separating Department: $1,500 / 1,500lbs = $1.00/lb
Cleaning Department: $900 / 1,500 lbs= $0.60/lb
Creaming Department: $210 / 700lbs = $0.30/lb
Total product cost per pound:
Regular Corn = $3.50 + $1.00 + $0.60 + $0.30 = $5.40
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Education.
2. Journal Entries:
a. To record the requisition of the raw corn for both types less
the cream cost:
WIP Inventory: Separation Department…….7,350
b. To apply conversion costs to the Separation Department:
WIP Inventory: Separation Department …….1,500
4-51 (continued -1)
c. To transfer both types of corn to the Cleaning Department:
WIP Inventory: Cleaning Department…..……8,850
WIP Inventory: Separation Department…..8,850
$7,350 + $1,500 = $8,850
d. To apply conversion cost to the Cleaning Department:
WIP Inventory: Cleaning Department………….900
e. To transfer the Regular Corn to the Creaming Department
and the Sweet Corn to Finished Goods Inventory:
WIP Inventory: Creaming Department………..3,270
Finished Goods Inventory……………..………………….6,480
WIP Inventory: Cleaning Department……9,750
f. To transfer cream costs and conversion cost to the
Creaming Department:
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Chapter 04 – Job Costing
WIP Inventory: Creaming Department…………….510
Direct Materials Inventory.……….………………300
Conversion Costs Applied ………………………..210
$.30/lb x 700 lbs = $210
g. To transfer the Creamed Corn to Finished Goods:
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Chapter 04 – Job Costing
4-52 Spoilage, Rework and Scrap (30 Min)
1. Normal spoilage is the occurrence of unacceptable units arising under
efficient operating conditions. Normal spoilage is an inherent result of
the particular process or operation and is uncontrollable in the short run.
The costs associated with normal spoilage are typically viewed as part of
the cost of the good units produced.
Abnormal spoilage is spoilage that is not expected to arise under
efficient operating conditions and is not an inherent part of the
2. a. Spoiled units are unacceptable units of production that are either
discarded or sold for disposal value.
b. Rework units are unacceptable units or production that are
subsequently reconditioned into good units which can be sold as
acceptable finished goods.
c. Scrap represents inputs that do not become part of the output and
have minor economic value when compared to the sales value of the
completed product.
3. a. An analysis of the 5,000 units rejected by Richport Company for Job
No. N1192-122 yields the following breakdown between normal and
abnormal spoilage.
Units
Normal spoilage (see below)* 3,000
production = production before any spoilage)
Good Production for 117,000 units = 117,000 / (1-.025)= 120,000 units; if we produced 120,000 units, we would expect a normal
spoilage of 2.5% for a net of 117,000 units; so Normal spoilage = 120,000 x .025 = 3,000 units, or 120,000 – 117,000 = 3,000
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Chapter 04 – Job Costing
4-52 (continued -1)
b. The journal entries required to properly account for Job No. N1192-
122 is presented below and uses an average cost per unit of $57
($6,954,000 / 122,000).
Debit Credit
Spoiled Inventory (4,100 x $7) $ 28,700
Loss from Abnormal Spoilage(b) 106,300
WIP Inventory (a) $135,000
Supporting Calculations:
a)
900 abnormal spoiled units @ $57 $ 51,300
1,100 other abnormal rejected units @ $57 62,700
b)
$135,000 – $28,700 = $106,300
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