Verer Custom Carpentry manufactures chairs 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 4% of the good units. Data provided for March 2017 are as follows:

What are the normal and abnormal spoilage units, respectively, for March when using FIFO?
A) 3204 units; 1396 units
B) 1968 units; 1420 units
C) 9749 units; 1540 units
D) 530 units; 2032 units

Question

Verer Custom Carpentry manufactures chairs 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 4% of the good units. Data provided for March 2017 are as follows:

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

What are the normal and abnormal spoilage units, respectively, for March when using FIFO?
A) 3204 units; 1396 units 
B) 1968 units; 1420 units 
C) 9749 units; 1540 units 
D) 530 units; 2032 units

Quizplus · Accepted Answer

Normal spoilage = 4% × 80,100 units = 3204 spoiled units
Abnormal spoilage = (32,500 units + 70,500) - (80,100 units + 18,300) - 3204 = 1396 units

Verer Custom Carpentry Manufactures Chairs in Its Processing Department