Appendix 3; WA; normal and abnormal discrete spoilage

Garys Tools manufactures one of its products in a two-department process. A separate Work in Process Inventory account is maintained for each department, and the company uses a weighted average process costing system. The first department is Molding; the second is Grinding. At the end of production in Grinding, a quality inspection is made and then packaging is added. Overhead is applied in the Grinding Department on a machine-hour basis. Production and cost data for the Grinding Department for August 2013 follow:

Production Data
Beginning WIP Inventory (percent complete: material, 0; labor, 35; overhead, 35)	1,100 units
Transferred in from Molding	48,800 units
Normal spoilage (found at the end of processing during quality control)	550 units
Abnormal spoilage (found at end of processing during quality control)	250 units
Ending WIP Inventory (percent complete: material, 0; labor, 45; overhead, 70)	1,500 units
Transferred to finished goods	? units

Cost Data
Beginning WIP Inventory
Transferred in	$	6,250
Material (label and package)		0
Direct labor		450
Overhead		840	$	7,540
Current period
Transferred in	$	150,935
Material (label and package)		23,800
Direct labor		16,726
Overhead		48,610		240,071
Total cost to account for			$	247,611

a. Prepare the August cost of production report for the Grinding Department. Gary's Tools assigns the cost of normal spoilage only to the products that are transferred out. As such, the company extends both the normal and abnormal spoilage units in the EUP schedule to all cost components except packaging (as packaging is not added to spoiled units). The cost of normal spoilage is attached to the units transferred to Finished Goods Inventory; the cost of abnormal spoilage is considered a period loss. Round the "Cost per EUP" to the nearest tenth of a cent, such as 3.375. Round cost assignment amounts to the nearest whole dollar. If an amount is zero, enter "0".

Garys Tools Grinding Department Cost of Production Report For the Month Ended August 31, 2013
Production Data:
		Units
Beginning WIP Inventory
Transferred in
Units to account for
		Units		Transferred In		Direct Material		Direct Labor		Overhead
Beginning WIP Inventory
Started & completed
Ending WIP Inventory
Normal spoilage
Abnormal spoilage
EUP (WA)
Cost Data:
		Total		Transferred In		Direct Material		Direct Labor		Overhead
Beginning WIP Inventory		$		$		$		$		$
Current costs
Total costs		$		$		$		$		$
Divided by EUP
Cost per EUP		$		$		$		$		$
Cost Assignment:
Transferred out:
Good units								$
Normal spoilage										$
Ending inventory:
Transferred in								$
Labor
Overhead
Abnormal spoilage
Total costs accounted for										$

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b. Prepare the journal entry to dispose of the cost of abnormal spoilage.