REQUIRED:

Answer Exercises 6 and 7.

94 Chapter In Exercise 6: Materials Cost - Accounting for Scrap Scrap materials with estimated value of P6,00C are gathered and separated from work in process. They are subsequently sold for P6,200. Make the entries under each of the following assumptions: a. Revenue from sale of scrap is recognized only upon sale as (1) other income, (2) as adjustment to factory overhead, or (3) as reduction in the cost of a particular job. b. Scrap is recognized upon separation thereof from work in process and revenue is treated as (1) as adjustment to factory overhead or (2) as reduction in the cost of a particular job. Exercise 7: Materials Cost - Accounting for Spoiled Goods Sunny Corp. manufactures portable beds and chairs made of round steel bars and woven plastic strips (similar to woven rattan strips). The steel bars are cut, heated and bent before they are connected by bolts and nuts to form the desired structures. The woven plastic strips are subsequently attached per specifications. For 19C, estimated factory overhead (without the corresponding provision for any imperfection) is P60,000 based on estimated direct labor cost of P120,000. Per estimates, a 5% spoilage may be expected with unrecovered cost of P3,000. For January, 19C, the company processed an order for 10 portable rocking chairs (job no. 027). The prime costs are as follows: Direct materials P10,000 Direct labor . 5,000 Upon final inspection, two rocking chairs are found below standard. Estimated cost recovery is P1,000 per chair. Questions: a. Assuming that the job is a regular or standard one, (1) what factory overhead rate must be used? (2) what must be the unit cost for the remaining eight rocking chairs upon completion? (3) what are the entries to take up the original production cost, spoilage, and completion of the remaining units? (Use three work in process accounts.) b. Assuming that the job is a special one, what would be your answers for the questions given above