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Material and Production Losses under Job Order
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chapter 8 8
Material and Production Losses under Job Order Costing
Learning Objectives:
‘At the endof this chapter, the students should be able fo
1. Define normal and abnormal losses.
2. Know the different forms of mater
system, production ofjobs may lead to material losses
‘or manufacturing losses are bow ue
Groldable, unexpected, and unusual
eetncst losses are treated as Pe
Sep cree, loing we cxamper of tno! ove “Theft, te,
ponte ualang pokinabong .
Forms of Matsa ones
3 lowingare th eyerent fons of material
19 pects [0c wb
its mpbaba ang yale Kun
ls OF residue of matéfials removed during the production
product, Seraps a
Mes due to ower
symal nahine
fora su waln-
craps are metal fragme
roien parts as a resul
[aa
att att vo)
in
preven = = wie
Ziel inpoterial ieee orto.
atl th peter < conten let
of the quantity of scrap returned t0 POH
1
fe the entry upon sale of sap material is:
it tawan8
cash/Accounts Recetvable 1000 ° ive uit os
Scrap Revenue/Other Income 3,000
of the
4 out of the scrapis treated as
Work in Pro
raceable to a particular job, the sales
tread control account and indirectly
fo record the sale of the Scrap:
Entry: Cash/Accounts Receivable 1,000
‘Factory Overhead Control 1,000
386 8; A Closer look on Cost Accounting
pte !
EOF
lue of the scrap materi es
10 long, the company provides an inventory of gq tng
‘and paced under the supervision of the sore? Sy
ing for serap inventory eturmed € storeroom a ae
fable to-a specific job or common to alljobg.” “Pend ee
_ KCharged to Specific Job
alue of the serap wil by declucted trom thy
he job order cost sheet. Hind weve
Titry?’ ——_erap Inventory ae
rm rn Workin Process 7
ores sory reum tothe Sioreroon iy
materials entered
Entry: Serap Inventory 3,000
ee Factory Overhead Control 1,000
To record son return the soreroom :
cr entry to record the sale of scrap materials
intey: Cash/Accounts Receivable 1,000
Scrap Inventory 1,000
To record the sale of scrap
‘scrap materials are reused as direct materials in the production, the
inventory account is debited at its estimated realizable value
storeroom. The journal
rap to the storeroom and it’s reused as direct
‘material in production is as follows: The scrap is common to all jobs
Entry: Materials 1,000
Factory Overhead Control 1,000
To record Scrap return to the storeroom
Work in Process invent
Materials = a
100
Tarecord the rise of scrap
| ) 387
eS
oes te
ob onder cot
ncing fo A. Specific Job ing
serine 3 Geanfan'* .B-Sommon to an
ie ae ay
x "oncom gy
Materia
me of Production Material ‘x
pact we xx FOH Control =
a1 AO ed whofe tt cerry
aoe Sees dre MMe Men
7
red:
eee
Prepare journal entries to record the sale of the scrap metals for
lowing alternatives: crap metals {4
we regarded as other income,
are regarded as a deduction to factory ovethead
‘charged to the jobs that generated the scrap.
Storeroom. A month later, the scraps reused
jobs.
solution
1 Cash/AR 5,000
Other Income 5,000
2. Cash/AR 5,000
__ FOH Control 5,000
3° Cash/AR 5,000
WIP 5,000
4 5,000
5,000
5,000
Materials 5,000
(FSPOILAGE daywage
AESAGE 2 UANOR) san aap cig
process ‘or goods that do-not meet the standard requ
‘Which cannot be brought back in good state either because i
388, Material and Production Losses under Job Orde,
Cosy
‘ble to correct them or it is not economical to correct them,
Soldat a reduced price. Spoilage arises due to inefficiency in prod
8; A Closer look on Cost Accounting
ion revealed that 1,800 pair of
inspect yaa ea
Jeans did not meet the quali
al fal ge, butcan be sold as Secoads ata rice of Pisa quality
\dard_materials, poor workmanship, fealty fort 8e ant srandardsy 5 over nie 1S.a pai
supervision and careless qual re journal entries ifthe costs of spoite,
see ee HY cone seguir: Peer spied gods are charged to
— 2 Spear (0 all jobs
‘Two Types of Spoilage b
Z Normal Spoilag
FE cn gti: nya
‘usual in the production of products. Mat sss cant betta _
‘but may be controlled by the company Z } normal spo a speci
is inventoriable and included as a cost of the product ie
(Accounting for Spotted G
Methods of Accounting for Normal Spollage | aaa gaaia STR
The accounting for spoiled goods depends on Bow the costs of spolag 4 wee zrAi0
te ees aye Hund spa Ole een A hag,
A. Charged to Specific Job WIP z
Segre IU nae essen ng
‘The effect ofthis approach is that,
ing good units.
ne —- 1 sean, F
WIP 1,800 x 15 499, 000
B. Common to all Jobs OH
Spoiled gods are normal and expected fr all jobs
such as employee error or worn-out machine. The ei
in the production are charged wi
4 realizable value of the normal
“Toracord he IO]
‘Accounting for Spoiled Goods | ~ completed units
Spoiled gods 27,000
charged to the factory overhead control account. The
‘at twill not change the unit costs of the remain
Mlustration: Alyn Corpor
du
ration had a production run of 24,000 pairs of fas
ring the month of Av y ti .
ot nugust. The following data for June production west Under the charged
Direct Materials: 10 \ Pee ee
Direct Labor 8
Factory Overhead jnciudes a Pl allowance for spoiled work)
at
+9 22
s recorded at its original amount
3 bi
tout ake Ossie
a 23800
sotpennan aie
a =e
$2,000
a a4. woo
au 1G
the specific job, the unit cost changed from P21 to
for spoiled wore is not inciuded in the factory overhead,
cause the job is due to
creases because only the
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