Assignment:
(Defective units and rework) Hoffus Corporation produces plastic pipe andaccounts for its production process using weighted average process costing.Material is added at thebeginning of production. The company applies overhead to products using machine hours. Hoffus Corporation used the followinginformation in setting its predetermined overhead rate for 2000:
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Expected overhead other than rework
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$425,000
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Expected rework costs
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37,500
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Total expected overhead
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$462,500
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Expected machine hours for 2000
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50,000
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During 2000, the following production and cost data were accumulated:
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Total good production completed
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2,000,000 feet of pipe
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Total defects
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40,000 feet of pipe
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Ending inventory (35% complete)
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75,000 feet of pipe
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Total (beginning inventory and current period) cost of direct material
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$3,750,000
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Total (beginning inventory and current period) cost of conversion
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$5,650,000
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Cost of reworking defects
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$ 37,750
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Hoffus Corporation sells pipe for $3.50 per foot.
a. Determine the overhead application rate for 2000.
b. Determine the cost per pipe-foot for production in 2000.
c. Assume that the rework is normal and those units can be sold for the regular selling price. How will Hoffus Corporation account for the $37,750 ofrework cost?
d. Assume that the rework is normal, but the reworked pipe is irregular and can only be sold for $2.50 per foot. Prepare the journal entry to establish the inventory account for the reworked pipe. What is the total cost perunit for the good output completed?
e. Assume that 20 percent of the rework is abnormal and that all reworked output is irregular and can be sold for only $2.50 per foot. Prepare thejournal entry to establish the inventory account for the reworked pipe.What is the total cost per foot for the good output completed during 2000?