Stanley Company installs granite countertops in customers' homes. First, the customer chooses the particular granite slab, and
Question:
Stanley Company installs granite countertops in customers' homes. First, the customer chooses the particular granite slab, and then Stanley measures the countertop area at the customer's home, cuts the granite to that shape, and installs it. The Flores job calls for direct materials of $2,000 and direct labor of $1,200. Overhead is applied at the rate of 140 percent of direct labor cost. Unfortunately, one small countertop breaks during installation and Stanley must cut another piece and install it to properly complete the job. The additional rework required direct materials costing $500 and direct labor costing $200. Assume that the spoilage was due to carelessness by a Stanley worker and it is considered to be normal spoilage.
Calculate the cost of the Flores job.
Make any needed journal entry to the overhead control account. If an amount box does not require an entry, leave it blank.
What if the additional rework required $400 of direct labor? What would be the effect on the cost of the Flores job?
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen