Victoria€™s Closet mass-produces luxurious sleepwear for women. Consider the following data for the flannel nightgown department for the month of January. All direct materials are added at the beginning of production in the department, and conversion costs are incurred evenly throughout production. Inspection occurs when production is 100% completed. Normal spoilage is 6,600 units for the month.

 

Required:

Prepare a material flow cost report using the FIFO method. Assume that the production process wastes 10% of all raw materials before taking into account spoilage. For simplicity, do not adjust the costs for beginning work in process.

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Physical Units Beginning WIP (25% complete) Started during January 11,000 74,000 85,000 Total to account for Good units completed and transferred out during current period: From beginning work in process Started and completed Spoiled units Ending WIP (75% complete) 11,000 50,000 8,000 16,000 85,000 Total accounted for Costs Beginning WIP: Direct materials $220,000 Conversion costs 30,000 250,000 Total beginning WIP Costs added during current period: Direct materials 1,480,000 Conversion costs 942,000 $2,672,000 Costs to account for