Question

Cost of Spoiled Units

Lieu Company is a specialty print shop. Usually, printing jobs are priced at standard cost plus 50 percent. Job 631 involved printing 400 wedding invitations with the following standard costs:

Direct materials	$220
Direct labor	80
Overhead	80
Total	$380

Normally, the invitations would be taken from the machine, the top one inspected for correct wording, spelling, and quality of print, and all of the invitations wrapped in plastic and stored on shelves designated for completed jobs. In this case, however, the technician decided to go to lunch before inspecting and wrapping the job. He stacked the unwrapped invitations beside the printing press and left. One hour later, he returned and found the invitations had fallen on the floor and been stepped on. It turned out that about 70 invitations were ruined and had to be discarded. An additional 70 invitations were then printed to complete the job.

Required:

1. Calculate the cost of the spoiled invitations. If required, round your answer to the nearest cent.
$

2. What is the price of Job 631?
$

3. Suppose that another job, 705, also required 400 wedding invitations. The standard costs are identical to those of Job 631. However, Job 705 required an unusual color of ink that could only be obtained in a formula that was difficult to use. Lieu printers know from experience that getting this ink color to print correctly requires trial and error. In the case of Job 705, the first 70 invitations had to be discarded due to inconsistencies in the color of ink. What is the cost of the spoilage? If required, round your answer to the nearest cent.
$

4. What is the price of Job 705? If required, round your answer to the nearest cent.
$

Answer 1

Answers we get below, egnolo Now here, Direct materiale $ 220.00 Direct labor $ 80.00 over head $ 80.00 Total $ 380 No. of wedding invitation $400 Cost per wedding invitation $ 0.95 380 400 0 No.of spoiled invitation $ 70.00 Cost of spoiled invitation $ 66.5 = 708 0.95 This cost of spo; lage should be charged to profit f loss amount because this is the normal loss in operation and relate to the cost of period. Total cost of job Markup 50% Total Price $ 380.00 $190.00 $ 570.00

(3 Here, the cost of spoilage will be same as 66.5 this cost of spoilage should be Charged to the respective job -705, because this cost specially relate to dob 705. $ 380.00 Normal cost of doba 705 Cost of spoilage Total $ 66.5 Markup 50% % $ 446.5 $ 223.25 $ 669.75 Total price :oo ofa 2009 loto