Normal spoiled units at the end of production An important product of the Stone Moun- tain Company is its Downhome Fudge which it manufactures and sells in 5-pound boxes to candy shops and other specialty stores that sell quality candy. The manufacture of high quality fudge is a special art that requires careful attention and skill. If the fudge is cooked too long it hardens in the pots and does not have the proper texture. If it is cooked too little it does not harden properly. Each 5-pound box of fudge is tested for quality in the last process center. Cooking, before it is sealed and shipped to customers. Any fudge not passing inspection is given to employees free of charge and is treated as normal spoilage.

On May 1 there were 2,000 units of beginning work in process inventory in the Cooking department with all materials added and 3/4 of the conversion. 8,000 units were transferred in during the month, and 2,000 units remained in work in process at month end with all materials and V2 conversion. Of the units completed during May, 1,000 were rejected in the inspection activity. The company policy is to report a separate lost unit cost to monitor the production efficiency of employees. The weighted average inventory method is used to account for all inventories. Below are May cost data for cooking:

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Beginning work in process inventory costs: Preceding department costs... $12,020 Direct materials... 3,840 Direct labor 2,550 Manufacturing overhead 3,450 Current period costs: Preceding department costs $48,480 Direct materials .... 16,160 Direct labor 13,650 Manufacturing overhead ... 18,150