The A. B. Chemical Corp. produces an industrial cleaner. Three processing departments are used in its manufacture. Direct materials are added at the beginning of the first two departments, Department A and Department B. Units are measured in terms of gallons. The raw materials added in Department B increase the gallons transferred in by 5%.

Inspection for spoiled units occurs at the 30% stage of completion in Department A, and the 70% stage of completion in Department B.

The company’s policy is to treat the cost of spoiled units in production as a separate element of cost in the department in which the spoilage occurs.

The cost accountant obtained the following information concerning October’s activity: mlp7

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Units: Beginning units in process % of completion Department A 170,000 gallons 15% 430,000 gallons Department B 115,000 gallons 45% Units started in process Units transferred to next department 490,000 gallons Ending units in process 98,000 gallons 25% 595,000 gallons 31,000 gallons 75% % of completion Spoiled units: Normal Abnormal Costs: Beginning work-in-process inventory; Costs from preceding department Direct materials Direct labor Factory overhead (applied) Costs added during the period: Direct materials Direct labor Factory overhead (applied) Required: 9,000 gallons 3,000 gallons 3,000 gallons 500 gallons $ 805.000 $ 595,000 195,500 31,875 103,500 57,375 155,250 1,612,500 900,375 738,900 1,137,900 1,108,350 1,706,850 Using the fifo costing method, prepare a cost of production report for Department A and Department B for October. (Assume no spoilage from beginning work-in-process inventory.)