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Riposte Corporation manufactures a computer chip called XD1. Manufacturing cost of one XD1 chip, excluding rework costs, are direct materials, $50; direct manufacturing labor, $12; and manufacturing overhead, $38. At the inspection point, defective units are sent back for rework. Rework costs per XD1 chip are direct materials, $12; direct manufacturing labor, $9; and manufacturing overhead, $15.

In August 2011, Riposte manufactured 1,000 XD1 chips, 80 of which required rework. Of these 80 chips, 50 were considered normal rework common to all jobs and the other 30 were considered abnormal rework.

1. Prepare journal entries to record the accounting for both the normal and abnormal rework.

2. What were the total rework costs of XD1 chips in August 2011?

3. Now assume instead that the normal rework is attributable entirely to job #3879, for 200 units of XD1. In this case, what would be the total and unit cost of the good units produced for that job in August 2011? Prepare journal entries for the manufacture of the 200 units, as well as the normal rework costs.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M946692

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