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| A metal fabricating company uses a job-order cost system. The company expects to have small residual pieces of metal cuttings and shavings from all of its jobs. Although the metal pieces and shavings cannot be reused, they can be sold for scrap. The scrap metal is sold when a ton of scrap has been accumulated. During the current month, 100,000 pounds of aluminum was requisitioned at $50 per pound. Aluminum scrap recovery totaled 800 pounds. This amount of scrap is within normal allowances for the company’s operations. The market price for scrap aluminum fluctuates greatly and has ranged from $.25 to $.40 per pound during the last 12?months. The accumulated scrap aluminum was sold last month for $.35 per pound. The appropriate accounting treatment for the scrap aluminum recovered during the current month is to A. Debit direct materials quantity variance for $1,200 (800 lbs.*$1.50/lb.) and credit work-in-process inventory control for $1,200, with postings to each job from which the scrap metal was recovered. B. Debit scrap inventory for $280 (800 lbs.* $.35/lb.) and credit factory overhead control for $280. C. For materiality reasons, no entry is made until the scrap metal is sold. At that time, debit cash and credit factory overhead control for the quantity sold at the current market price. D. Debit direct materials quantity variance for $1,200 (800 lbs.* $1.50/lb.) and credit factory overhead control for $1,200 at the time of recovery, and when the scrap is sold, debit cash and credit direct materials quantity variance for the quantity sold at the current market price. |