Portofino Company manufactures custom doors. When Job 186 (a batch of 14 custom doors) was being processed in the machining department, one of the wood panels on a door split. This problem occurs periodically and is considered normal spoilage. Direct materials and labor for the door, to the point of spoilage, were $35. In addition, a storm caused a surge in electricity, and a routing machine punctured the wood for Job 238. This incident occurred at the beginning of production, so spoilage amounted to only the cost of wood, at $200.
REQUIRED
A. Prepare the journal entries for normal and abnormal spoilage.
B. Now suppose that the wood from abnormal spoilage can be sold for $25. Record the journal entries for the disposal value.
C. Portofino Company is considering hiring someone to inspect all wood after it arrives at the plant but prior to production. Discuss the pros and cons of hiring an inspector.