Question: Recognition of loss from spoilage. Spheres Toys manufactures globes at its San Fernando facility. The company provides you with the following information regarding operations for April 2017:
Total globes manufactured 20,000
Globes rejected as spoiled units 750
Total manufacturing cost $800,000
Assume the spoiled units have no disposal value.
1. What is the unit cost of making the 20,000 globes?
2. What is the total cost of the 750 spoiled units?
3. If the spoilage is considered normal, what is the increase in the unit cost of good globes manufactured as a result of the spoilage?
4. If the spoilage is considered abnormal, prepare the journal entries for the spoilage incurred.