The Holt Manufacturing Company has the following information available regarding its September operations:

Holt adds all materials at the beginning of the process and estimates that ending inventory is 70% complete.
Required:

a) Compute the cost of goods transferred to finished goods and the cost of spoilage assuming that all spoilage cost is considered to be undesirable and is written off in the accounting period incurred. The company uses the weighted-average method. Spoiled units are inspected out at the end of the process.
b) Explain why some managers might not consider any spoilage to be normal spoilage. How does identifying spoilage as a separate cost help in process improvement?

Question

The Holt Manufacturing Company has the following information available regarding its September operations:
 
Holt adds all materials at the beginning of the process and estimates that ending inventory is 70% complete.
Required:

a) Compute the cost of goods transferred to finished goods and the cost of spoilage assuming that all spoilage cost is considered to be undesirable and is written off in the accounting period incurred. The company uses the weighted-average method. Spoiled units are inspected out at the end of the process.
b) Explain why some managers might not consider any spoilage to be normal spoilage. How does identifying spoilage as a separate cost help in process improvement?

Quizplus · Accepted Answer

The Answer of The Holt Manufacturing Company has the following information available regarding its September operations:
 
Holt adds all materials at the beginning of the process and estimates that ending inventory is 70% complete.
Required:

a) Compute the cost of goods transferred to finished goods and the cost of spoilage assuming that all spoilage cost is considered to be undesirable and is written off in the accounting period incurred. The company uses the weighted-average method. Spoiled units are inspected out at the end of the process.
b) Explain why some managers might not consider any spoilage to be normal spoilage. How does identifying spoilage as a separate cost help in process improvement?

The Holt Manufacturing Company Has the Following Information Available Regarding