Flextron’s controller, Vince Chadwick, tells Marta Suarez, the management accountant responsible for Job No. M102, the following: “This was an unusual job. I think all 6,000 spoiled units should be considered normal.” Suarez knows that the work involved in Job No. M102 was not uncommon and that Flextron’s normal spoilage rate of 2% is the appropriate benchmark. She feels Chadwick made these comments because he wants to show a higher operating income for the year. a. What should Suarez do in response to Chadwick’s comment? Job costing, classifying spoilage, ethics. Flextron Company is a contract manufacturer for a va-riety of pharmaceutical and over-the-counter products. It has a reputation for operational excellence andboasts a normal spoilage rate of 2% of normal input. Normal spoilage is recognized during the budgetingprocess and is classified as a component of manufacturing overhead when determining the overhead rate.Lynn Sanger, one of Flextron's quality control managers, obtains the following information for Job No.M102, an order from a consumer products company. The order was completed recently, just before the closeof Flextron's fiscal year. The units will be delivered early in the next accounting period. A total of 128,500 unitswere started, and 6,000 spoiled units were rejected at final inspection, yielding 122,500 good units. Spoiledunits were sold at $4 per unit. Sanger indicates that all spoilage was related to this specific job.The total costs for all 128,500 units of Job No. M102 follow. The job has been completed, but the costsare yet to be transferred to Finished Goods.Direct materials$ 979,000Direct manufacturing laborManufacturing overheadTotal manufacturing costs840,0001,650,500$3,469,500

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Flextron’s controller, Vince Chadwick, tells Marta Suarez, the management accountant responsible for Job No. M102, the following: “This was an unusual job. I think all 6,000 spoiled units should be considered normal.” Suarez knows that the work involved in Job No. M102 was not uncommon and that Flextron’s normal spoilage rate of 2% is the appropriate benchmark. She feels Chadwick made these comments because he wants to show a higher operating income for the year.

a. What should Suarez do in response to Chadwick’s comment?

Job costing, classifying spoilage, ethics. Flextron Company is a contract manufacturer for a va-
riety of pharmaceutical and over-the-counter products. It has a reputation for operational excellence and
boasts a normal spoilage rate of 2% of normal input. Normal spoilage is recognized during the budgeting
process and is classified as a component of manufacturing overhead when determining the overhead rate.
Lynn Sanger, one of Flextron's quality control managers, obtains the following information for Job No.
M102, an order from a consumer products company. The order was completed recently, just before the close
of Flextron's fiscal year. The units will be delivered early in the next accounting period. A total of 128,500 units
were started, and 6,000 spoiled units were rejected at final inspection, yielding 122,500 good units. Spoiled
units were sold at $4 per unit. Sanger indicates that all spoilage was related to this specific job.
The total costs for all 128,500 units of Job No. M102 follow. The job has been completed, but the costs
are yet to be transferred to Finished Goods.
Direct materials
$ 979,000
Direct manufacturing labor
Manufacturing overhead
Total manufacturing costs
840,000
1,650,500
$3,469,500

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