Returning Subcontracted Material

Subcontracted material can be returned for replacement or credit:

When you return it for replacement, the system makes no accounting entries other than the recognition of the outside processing costs for the good assemblies. This is handled in the earned labor, overhead, outside processing entry in WIP.

When you return subcontracted material for credit, the system scraps the unacceptable assemblies in production. Since the outside processing costs are not incurred, the assemblies must be scrapped at a cost that includes all material, labor, overhead, and outside processing costs up to that subcontracted operation. It does not include the subcontracted operations costs.