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 $2,500 and direct labor of $700. Overhead is applied at the rate of 150 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 $1,000 and direct labor costing $700 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? No 3. What if the additional rework required $1,400 of direct labor? What would be the effect on the cost of the Tramel job? If the additional rework required $1,400 of direct labor rather than $700, then the total cost of the Tramel job would increase、〈 by $ to

Answer 1

1) Cost of Tramel Job = Material Cost + Labour cost

                                       = (2500+1000) + (700+700)

                                       = $ 4900

3 ) If the additional rework required $1400 of direct labour rather than $700, then Total cost of       Tramel Job = Material Cost + Labour cost   

                     = (2500 + 1000) + (700+1400)

                     = $ 5600

So Cost of Tramel Job increase from $ 4900 to $5600