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21. Appendix: Normal and Abnormal Spoilage in Process Costing Novel Toys, Inc., manufactures plastic water guns. Each gun's left and right frames are produced in
21. Appendix: Normal and Abnormal Spoilage in Process Costing
Novel Toys, Inc., manufactures plastic water guns. Each gun's left and right frames are produced in the Molding Department. The left and right frames are then transferred to the Assembly Department where the trigger mechanism is inserted and the halves are glued together. (The left and right halves together define the unit of output for the Molding Department.) In June, the Molding Department reported the following data:
- In the Molding Department, all direct materials are added at the beginning of the process.
- Beginning work in process consisted of 3,000 units, 20 percent complete with respect to direct labor and overhead. Costs in beginning inventory included direct materials, $450; and conversion costs, $138.
- Costs added to production during the month were direct materials, $950; and conversion costs, $2,174.50.
- Inspection takes place at the end of the process. Malformed units are discarded. All spoilage is considered abnormal.
- During the month, 7,000 units were started, and 8,000 good units were transferred out to Finishing. All other units finished were malformed and discarded. There were 1,000 units that remained in ending work in process, 25 percent complete.
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