The accountant at Cellular Advantage needs to close the books at the end of January using the following information. Direct materials are added at the start of production. Conversion costs are incurred evenly throughout production.
Inspection occurs when production is 75% completed. Normal spoilage is 13,200 units per month.
Physical Units
Work in process, beginning (30% complete) ........ 22,000
Started during the month ............... 148,000
Total units to account for .............. 170,000
Good units completed and transferred out during current period:
From beginning work in process ............. 22,000
Started and completed ................. 100,000
Total good units completed ............... 122,000
Spoiled units .................... 16,000
Work in process, ending (60% complete) ......... 32,000
Total units accounted for ................ 170,000
Costs
Beginning inventory:
Direct materials ................................. $ 440,000
Conversion costs .................. 60,000
Total beginning inventory ................ 500,000
Costs added during current period:
Direct materials .................... 2,960,000
Conversion costs ................... 1,884,000
Total costs to account for ............... $5,344,000

REQUIRED
A. Prepare a process cost report using the weighted average method.
B. Prepare a process cost report using the FIFO method.
C. Explain why an organization might specify limits for normal spoilage, after which spoilage is considered abnormal.
D. To reduce spoilage, units are sometimes reworked. How are rework costs recorded?