Reference no: EM132806046

Question - Superio Ltd. uses process costing to determine its product costs. In its processing department, direct material A is added at the beginning of the process and direct material B 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. What is the cost of the abnormal spoilage for January?

a) $1,464

b) $1,592

c) $1,886

d) $2,442