Question

Cost of Normal Spoilage Caused by Nature of Job Frieling Company installs granite countertops in customers' homes. First, the customer chooses the particular granite slab, and then Frieling measures the countertop area at the customer's home, cuts the granite to that shape, and installs it. The Tramel job calls for direct materials of $1,900 and direct labor of $500. Overhead is applied at the rate of 140 percent of direct labor cost. Unfortunately, one small countertop breaks during installation and Frieling must cut another piece and install it to properly complete the job. The additional rework required direct materials costing $400 and direct labor costing $100. Assume that the spoilage was due to the inherently fragile nature of the piece of stone picked out by the Tramels. Frieling had warned them that the chosen piece could require much more care and potentially additional work. As a result, Frieling considers this spoilage to be caused by the Tramels' job.

Answer 1

3.

Calculation of Cost of Tramel Job
Direct materials ( 1,900+400)	2,300
Direct labor ( 500+200)	700
Manufacturing overhead applied	980
Total cost	$3,980

Manufacturing overhead applied = Direct labor cost x Predetermined overhead rate

= 700 x 140%

= $980

Increase in Tramel job cost = 3,980-3,740

= $240

Tramel job would increase by $240 to $3,980.

Kindly comment if you need further assistance.

Thanks‼!