tracting officer of the U.S. Air Force: INVOICE Materials Cost . $11,786.25 Labor Cost . 7,811.25

tracting officer of the U.S. Air Force:

INVOICE

Materials Cost

.

$11,786.25

Labor Cost

.

7,811.25

Factory Overhead

.

5,207.50

Total Cost

.

$24,805.00

Fixed Fee

.

1,145.00

Total (for 120 mo

tors)

.

$25,950.00

Journal Entries for Spoiled and Defective Work; Revising an Invoice. Masten Manufacturing, Inc. produces small motors on special orders. In February a U.S. Air Force contract for the production of 120 motors at cost plus a fixed fee of $1,145 was completed. This invoice was mailed to the con-

The Air Force Cost Inspector objected to this billing, stating that the spoilage of 5 motors and additional costs for I defective motor had been charged directly to the Air Force job, whereas the procedure previously had been to spread such costs over all the jobs.

The spoiled motors had been sold as scrap for $50 each (the original scrap

value assigned to them). The defective motor had required $30 of additional materials and 5 labor hours to correct its defects. Men working on the contract were paid $3 per hour and had worked a total of 7,200 hours, of which 2,630 hours had been spent on the Air Force contract. Masten Manufacturing, Inc. uses a predetermined factory overhead rate of $2 per labor hour. Each motor requires $95 of direct materials. Spoiled and defective work is discovered during final inspection after all normal labor costs have been incurred.

Required: Assuming that the company's work in process account has not

been credited for any work completed during February:

(a) All journal entries that Masten Manufacturing, Inc. has made in con- nection with this contract.

(b) The journal entries the company should have made for the spoiled and defective work.

(c) The journal entries to correct the books and complete the contract. (d) A revised invoice for the U.S. Air Force.