Reference no: EM132863641

Question - A company manufactures snowblowers. During December job #205 for 50 snowblowers had 5 units that were dented. The spoiled units were detected immediately before they were shipped. They had already passed the safety inspection. The marketing manager believes the snowblowers can be sold, as is, for $300 each. They had a cost at point of detection of $400 each. These costs included $250 for direct materials, $100 for direct manufacturing labour, and $50 for factory overhead.

Required -

a. Prepare the necessary journal entry or entries under each of the following independent situations:

i. SITUATION 1: Record the spoiled units if the spoilage is normal and not specific to job #205.

ii. SITUATION 2: Record the spoiled units if the spoilage is normal and specific to job #205.

iii. State whether the unit cost of the good (unspoiled) snowblowers stays the same or increases after the journal entry to record the spoilage is made: in part (i) in part (ii).

SITUATION 3: In this situation, the cause of the dents were due to a forklift driver who mistakenly left the units outside during a hailstorm. Instead of selling the dented snowblowers 'as is', the production manager decides to fix them and sell them for full price. The total cost to fix all 5 snowblowers is $600 of direct materials, $325 of direct labour, and $250 of factory overhead. Prepare the journal entry to record the additional costs.