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 $2,200 and direct labor of $1,300. Overhead is applied at the rate of 110 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 $700 and direct labor costing $400.

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 $2,200 and direct labor of $1,300. Overhead is applied at the rate of 110 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 $700 and direct labor costing $400. 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. Required: 1. Calculate the cost of the Tramel job. 2. Does a journal entry to the overhead control account need to be made? 3. What if the additional rework required $800 of direct labor? What would be effect on the cost of the Tramel job? If the additional rework required $800 of direct labor rather than $400, then the total cost of the Tramel job would by s to

Answer 1

1) Cost of Tramel job = $6,470

Direct materials	$2,200
Direct labor	$1,300
Overhead	$1,430	(110%*1300)
	$4,930
Additional rework
Direct materials	$700
Direct labor	$400
Overhead	$440	(110%*400)
	$6,470

2) Does a journal entry to the overhead control account need to be made: No

3) If the additional rework required $800 direct labor rather than $400, then the total cost Tramel job would increase by $840 to $7310

Direct materials	$2,200
Direct labor	$1,300
Overhead	$1,430	(110%*1300)
	$4,930
Additional rework
Direct materials	$700
Direct labor	$800
Overhead	$880	(110%*800)
	$7,310