Reference no: EM132667457
Factory uses process costing to determine its product costs. In its processing department Direct material AB:
- is added at the beginning of the process.
- Direct material is added when production is 90% complete.
- Conversion costs are added evenly throughout.
- The inspection point is at the 80% stage of production.
- 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?