Question:
(Accounting for scrap) Renaissance Creations restores antique stained glass windows. All jobs generate some breakage or improper cuts. This scrap can be sold to stained glass hobbyists. Renaissance Creations expects to incur approximately 45,000 direct labor hours during 2010. The following estimates are made in setting the predetermined overhead rate for 2010:
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Overhead costs other than breakage
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$297,200
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Estimated cost of scrap
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$25,200
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Estimated sales value of scrap
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(7,400)
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17,800
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Total estimated overhead
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$315,000
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One job that Renaissance Creations completed during 2010 was a stained glass window of the Pierce family crest that took 125 hours and direct labor is invoiced at $20 per hour. Total direct material cost for the job was $890. Scrap that was generated from this job was sold for $93.
a. What was the predetermined overhead rate (set on the basis of direct labor hours) for 2010?
b. What was the cost of the Pierce stained glass window?
c. Prepare the journal entry to record the sales value of the scrap from the Pierce stained glass window.
d. Assume instead that only certain jobs generate scrap. What was the cost of the Pierce stained glass window?