Reference no: EM132667484

Factory uses process costing to determine its product costs. In its processing department

Direct material AB:

1. is added at the beginning of the process.
2. Direct material is added when production is 90% complete.
3. Conversion costs are added evenly throughout.
4. The inspection point is at the 80% stage of production.
5. Normal spoilage is 2% of all good units that pass inspection.

The following details are available for January production.

Beginning inventory

Number of units 4,500

Direct materials cost $22,500

Conversion cost $13,000

Per cent completion 65%

Month of January activity

Number of units started 25,000

Direct material A cost $160,000

Direct material B cost $354,000

Conversion costs $560,600

Number of units completed 22,000

Ending inventory 7,000

Per cent completion of ending inventory 40%

The company uses the FIFO method.

Problem 1: What is the cost of the abnormal spoilage for January?