Problem for Self-study

Burlington Textiles has spoiled goods with an assigned cost of $40,000 and zero net disposal value.

Prepare a journal entry for each of the following conditions under (1) process costing (department A) and (2) job costing:

Required

  1. Abnormal spoilage of $40,000 
  2. Normal spoilage of $40,000 regarded as common to all operations 
  3. Normal spoilage of $40,000 regarded as attributable to specifications of a particular job

Solution

<p>A table shows journal entries for different types of spoilage under process costing and job costing</p>

The table depicts journal entries for different types of spoilage under process costing and job costing. The details of the table are as follows:

  1. Abnormal spoilage of 40,000 dollars, process costing
    • Loss from abnormal spoilage: 40,000
    • Work in process, Department A: 40,000
  2. Abnormal spoilage of 40,000 dollars, job costing
    • Loss from abnormal spoilage: 40,000
    • Work in process control, specific job: 40,000
  3. Normal spoilage of 40,000 dollars regarded as common to all operations, process costing
    • No entry until units are completed and transferred out. Then normal spoilage costs are transferred as part of cost of good units
    • Work in process control, Department B: 40,000
    • Work in process control, Department A: 40,000
  4. Normal spoilage of 40,000 dollars regarded as common to all operations, job costing
    • Manufacturing overhead control: 40,000
    • Work in process control, specific job: 40,000
  5. Normal spoilage of 40,000 dollars regarded as attributable to specifications of a particular job, process costing
    • Not applicable
  6. Normal spoilage of 40,000 dollars regarded as attributable to specifications of a particular job, job costing
    • No entry. Normal spoilage cost remains in
    • Work-in-process control, specific job