Whitefish Machine Shop is a manufacturer of motorized carts for vacation resorts. Pat Cruz, the plant manager of Whitefish, obtains the following information for Job #10 in August 2013. A total of 40 units were started, and 5 spoiled units were detected and rejected at final inspection, yielding 35 good units. The spoiled units were considered to be normal spoilage. Costs assigned prior to the inspection point are $1,000 per unit. The current disposal price of the spoiled units is $200 per unit. When the spoilage is detected, the spoiled goods are inventoried at $200 per unit.
1. What is the normal spoilage rate?
2. Prepare the journal entries to record the normal spoilage, assuming:
a. The spoilage is related to a specific job.
b. The spoilage is common to all jobs.
c. The spoilage is considered to be abnormal spoilage.