Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 37

Spoilage and Scrap (appendix)

Lexan Textile Company’s Job X12 had one of its 20 units spoiled. The cost incurred on the unit was $600. It was specific normal spoilage with an estimated disposal price of $300 for the spoiled unit. Job Y34 had common normal spoilage with the estimated cost of $400 from the general production process failure and abnormal spoilage of $200. The company also incurred scrap due to Job Y34 and sold it for $80. It also sold the scrap common to all jobs for $120 cash in May.

Required

1. Make the necessary journal entries to record normal and abnormal spoilage costs.

2. Make the necessary journal entries to record both types of scrap sold.

Step 1 of 10

Job Costing:

Job Costing is the one of the method of costing approach where different costs are identified, accumulated and are assigned to the specific jobs. Under job costing, a job cost sheet is prepared wherein costs are identified as direct and indirect and are recorded in the job cost sheet.