Spoilage with a Salvage Value in a Process Cost System Using an Average Cost Flow Assumption, juniper ^ Company manufactures a single product in two departments, Cutting and Finishing. Units of product are started in the Cutting Department and then transferred to the Finishing Department, where they are com- pleted. Units are inspected at the end of the production process in the Finishing Department. Good units are transferred to Finished Goods Inventory, and spoiled units are transferred to Spoiled Goods Inventory. Spoiled units are inventoried at their salvage value of $15 each, and the unrecoverable cost of spoilage is charged to Factory Overhead Control.

At the end of June, 500 units were still in process in the Finishing Department, 80% complete as to materials and 60% complete as to conversion costs. During July, 4,500 units were transferred from the Cutting Department to the Finishing Department and 3,800 were transferred from the Finishing Department to Finished Goods Inventory. At the end ofJuly, the Finishing Department still had 800 units in process, 40% complete as to materials and 20% complete as to conversion costs. Cost data related to July operations in the Finishing Department are: LO6 Costs charged to the department: Cost from preceding department Materials.

Labor.

Factory overhead.

Beginning Added Inventory This Period

$5,500

$54,500 1,950 20,650 1,180 16,260 1,770 24,390 Required:

(1) Assuming the company uses a process cost system with average costing to account for its production, pre¬ pare a cost of production report for the Finishing Department based on the data presented for July.

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