Intelligent Composite Materials Inc. is a manufacturer of advanced composites that can be formed electronically. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of the product XJ1 are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value. The company uses standard costs with $300 per equivalent unit for direct materials, and $90 per equivalent unit for conversion costs for both beginning work-in-process inventory and work done during the period. Summary data for the month of July follow:
Required:
a. Prepare a production cost report assuming the spoilage is recognized.
b. Prepare the necessary journal entry to record abnormal spoilage.

Question

Intelligent Composite Materials Inc. is a manufacturer of advanced composites that can be formed electronically. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of the product XJ1 are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value. The company uses standard costs with $300 per equivalent unit for direct materials, and $90 per equivalent unit for conversion costs for both beginning work-in-process inventory and work done during the period. Summary data for the month of July follow:
  Required:
a. Prepare a production cost report assuming the spoilage is recognized.
b. Prepare the necessary journal entry to record abnormal spoilage.

Quizplus · Accepted Answer

The Answer of Intelligent Composite Materials Inc. is a manufacturer of advanced composites that can be formed electronically. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of the product XJ1 are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value. The company uses standard costs with $300 per equivalent unit for direct materials, and $90 per equivalent unit for conversion costs for both beginning work-in-process inventory and work done during the period. Summary data for the month of July follow:
  Required:
a. Prepare a production cost report assuming the spoilage is recognized.
b. Prepare the necessary journal entry to record abnormal spoilage.