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Cost assignment with spoilage

Ottawa Manufacturing produces a plastic toy in a two-stage molding and finishing operation. The company uses the weighted-average method of process costing. During June, the following data were recorded for the Finishing Department:

Units of beginning Inventory 10,000
Percentage completion of beginning units 25%
Cost of direct materials in beginning work in process $0
Units started 70,000
units completed 50,000
Units in ending inventory 20,000
Percentage completion of ending units 95%
Spoiled units 10,000
Total costs added during current period
Direct Materials $655,200
Direct Manufacturing labor $635,600
Manufacturing overhead $616,000
Work in process, beginning
Transferred-in costs $82,900
Conversion costs $42,000
Costs of units transferred in during current period $647,500

Conversion costs are added evenly during the process. Direct material costs are added when production is 90% complete. The inspection point is at the 80% stage of production. Normal spoilage is 10% if all good units that pass inspection. Spoiled units are disposed of at zero net disposal value.

For June, summarize total costs to account for, and assign these costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in the ending work in process.

Solution Summary

The solution explains how to assign costs using process costing with spoilage