Spoilage in a Process Cost System Using an Average Cost Flow Assumption. Manx Company uses a process cost system with average costing to account for the production of its only product. The product is manufac¬ tured in two departments. Units of product are started in the Forming Department and then transferred to the Finishing Department, where they are completed. Units are inspected at the end of the production process in the Forming Department, and the cost of spoilage is charged to Factory Overhead Control. Data related to August operations in the Forming Department are: LO6 Units in beginning inventory (60% materials, 35% labor, 25% overhead).

Units started in process thisperiod.

Units transferred to the Finishing Department thisperiod.

Units in ending inventory (100% materials, 75% labor, 50% overhead).

Beginning Inventory 1,000 9,000 8,000 1,500 Added This Period Costs charged to the department:

Materials.

Labor.

Factoryoverhead.

$1,260 770 1,400

$36,240 10,780 21,725 Required:

(1) Prepare a cost of production report for the Forming Department based on the data presented for August.

(2) Prepare the appropriate general journal entry to record the transfer of cost out of the Forming Department this period.