Reference no: EM132798111

Question - The Catering Company operates under a weighted-average method of process costing. It has three departments: Milling, Cutting and Packaging. For all three departments, conversion costs are incurred uniformly throughout the processes. Direct materials are added at the beginning of the process in the Milling department, materials are added when the cutting process is 80% completed, and materials are added when the packaging process is 90% completed.

Production and costs data for the Cutting department for the month of June, 2020 are provided below:

CUTTING DEPARTMENT DATA FOR THE MONTH OF June, 2020

WIP, beginning inventory (65% completed): 900 Units

Started in June (Transferred-in): 2,550 Units

WIP, ending inventory (75% completed): 660 Units

WIP, beginning inventory costs: Transferred-in $7,200

Direct Materials $11,600

Conversion costs $9,590

Costs incurred in June:

Transferred-in $34,200

Direct materials $39,880

Conversion costs $35,560

Spoiled units are detected when the conversion process is 60% completed in the cutting department. On average, Catering Company expects spoiled units to be 5% of the good units that survived the inspection in the cutting department.

The spoiled units are sold to a local shop for $5.00 per unit. The proceeds from the sale of spoiled units are credited to normal spoilage. In the month of June, 150 units were spoiled and sold to the local shop.

Required -

1. For the month of June 2020, prepare the cutting department production report that includes a reconciliation of the physical units, and determines the cost of goods transferred-out, the cost of ending work-in-process, and the loss from abnormal spoilage. Provide all necessary schedules to support your computations.

2. Prepare the journal entry to record the accounting of the cutting department production costs for the month of June 2020.

3. Provide a recommendation as to Catering accounting procedures regarding spoiled units.