Robolane Incorporated Manufactures and Distributes Small Robotic Toys

question 56

Essay

Robolane Incorporated manufactures and distributes small robotic toys. Because most of its orders are via telephone or fax, numerous orders have to be reworked. The average cost of the reworked orders is $12.45: $5 for labor, $5.15 for more materials, and $2.30 for overhead. This ratio of costs holds for the average original order. On a recent day, the shop reworked 80 orders out of 800. The original cost of the 80 orders totaled $2,000. The average cost of all orders is $26.245, including rework, with an average selling price of $35.
Required:
Prepare the necessary journal entry to record the rework for the day if the shop charges such activities to Robo Department Overhead Control. Prepare journal entries to record all relevant rework charges as well as to transfer the reworked items finished goods to Finished Goods Inventory.

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Definitions:

Producer Surplus

The difference between what producers are willing to sell a product for and the actual price at which they sell it.

Market Supply Elasticity

A measure of how much the quantity supplied of a good changes in response to a change in price.

Supply Curves

Graphical representations showing the relationship between the price of a good and the amount of it that producers are willing to supply at that price.

Average Variable Cost

The total variable costs of production divided by the quantity of output produced, indicating the cost to produce an additional unit when fixed costs are excluded.