Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to undetectable material defects. Spoiled units generally constitute 3% of the good units. Data provided for February 2017 are as follows:

What are the normal and abnormal spoilage units, respectively, for February when using FIFO?

Question

Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to undetectable material defects. Spoiled units generally constitute 3% of the good units. Data provided for February 2017 are as follows:

What are the normal and abnormal spoilage units, respectively, for February when using FIFO?

Quizplus · Accepted Answer

Normal spoilage = 3% × 180,800 units = 5424 spoiled units
Abnormal spoilage = (51,600 + 170,100 - 180,800 - 26,800 - 5424) = 8676 units

Samantha's Office Supplies Manufactures Desk Organizers in Its Processing Department