Paradise BayShop is a manufacturer of golf carts. Peter Cranston, the plant manager ofParadise Bay,obtains the following information for Job#22in August2020.A total of23units were started, and3spoiled units were detected and rejected at final inspection, yielding20good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection point are$1,300per unit. Assume that the3spoiled units ofParadise BayShop's Job#22can be reworked for a total cost of$2,200.A total cost of$3,900associated with these units has already been assigned to Job#22before the rework. Requirements: Prepare the journal entries for the rework, assuming the following:a.The rework is related to a specific job.b.The rework is common to all jobs.c.The rework is considered to be abnormal.

Journal Entry is the primary step to record the transaction in the books of accounts. The increase…

Answered: Paradise Bay Shop is a manufacturer of…

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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Paradise Bay

Shop is a manufacturer of golf carts. Peter Cranston, the plant manager of

Paradise Bay,

obtains the following information for Job

#22

in August

2020.

A total of

units were started, and

spoiled units were detected and rejected at final inspection, yielding

good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection point are

$1,300

per unit. Assume that the

spoiled units of

Paradise Bay

Shop's Job

#22

can be reworked for a total cost of

$2,200.

A total cost of

$3,900

associated with these units has already been assigned to Job

#22

before the rework. Requirements:

Prepare the journal entries for the rework, assuming the following:

The rework is related to a specific job.

The rework is common to all jobs.

The rework is considered to be abnormal.

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Verizon Manufacturing Company spent $420,000 in 2019 to inspect incoming components. Of the $420,000, $240,000 is fixed appraisal costs. The variable inspection cost is $0.20 per component. It takes six components for each finished product. Internal failure costs average $80 per failed unit of finished goods. In 2019, five percent of all completed items had to be reworked. External failure costs average $200 per failed unit. The company's average external failures are one percent of units sold. The company manufactures all units as ordered and carries no materials inventories. Seeking to decrease its total cost of quality (COQ), Verizon contracted Quality-is-Free Consultants, Inc. (QIFC) to study ways to improve product quality and to reduce costs. Upon completion of the study, QIFC recommended automatic inspection equipment that requires a $63,800 annual cost for training and $169,000 for equipment rental and maintenance. The new equipment will eliminate $49,500 of the fixed appraisal…
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