Process Costing with Spoilage: Spoilage West Corporation makes a product called Aggregate in one department of the California Division.

Direct materials are added at the beginning of the process. Labor and overhead are added continuously throughout the process. Spoilage occurs at the beginning of the process just after materials have been added but before any conversion costs have been incurred. In the California Division, all departmental overhead is charged to the departments, and divisional overhead is allocated to the departments on the basis of direct labor-hours. The divisional overhead rate is $2 per direct labor-hour. The following information relates to production during November:

I. Work in process inventory. November 1 (4,000 pounds—75 percent complete):

2. Direct materials:

3. Direct labor costs at $5 per hour, $103,350.

4. Direct departmental overhead costs, $52,000.

5. Transferred out, 15,000 pounds.

6. Work in process inventory, November 30, 3,000 pounds, 33^1/3 percent complete.

The FIFO method is used for materials inventory valuation, and the weighted average method is used for work in process inventories.

Required: Prepare a production cost report for this department of California Division for November. Include the costs assigned to spoiled units (the "second method" in the text).

Transcribed Image Text:

Direct materials $22,800 Direct labor at $5 per hour 24,650 Departmental overhead 12,000 Divisional overhead 9,860