Answer the following questions using the information below:
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 nondetectible material defects. Spoiled units generally constitute 4% of the good units. Data provided for February 2012 are as follows:
Costs:

-What costs would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing?

Question

Answer the following questions using the information below:
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 nondetectible material defects. Spoiled units generally constitute 4% of the good units. Data provided for February 2012 are as follows:
    Costs:
 
-What costs would be associated with normal and abnormal spoilage, respectively, using the FIFO method of process costing?

Quizplus · Accepted Answer

Normal spoilage costs are expensed as incurred, while abnormal spoilage costs are capitalized as part of the cost of goods sold. Under FIFO, the oldest units are assumed to be sold first, so normal spoilage costs would be associated with the oldest units, while abnormal spoilage costs would be associated with the most recent units.

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