Defective Goods
Defective Goods
Defective Goods
A job order for 30 kitchen cabinets entails the following prime costs:
Direct materials P18,000
Direct labor 12,000
Factory overhead rate of 80% of direct labor cost includes 3% provision for
reprocessing cost of defective work.
Five of the cabinets are found to have imperfections and are reprocessed. Prime cost
incurred un reprocessing amounts to P2,000 ( direct materials - P800, and Direct labor -
P1,200).
Reprocessing Cost treated as factory overhead.
costs
Direct materials P18,000
Drect labor 12,000
factory overhead (80% x P12,000) 9,600
39,600
cost
Direct Materials 18,000
Direct labor 12,000
Factory overhead (77% x 12000) 9,240
39,24