Dexter Industries Sdn Bhd manufactures water-heaters for the Asian market. One of its most popular model is the TX20. It goes through a series of manufacturing processes from assembly, painting, packing and finally to finished goods.

In the packing department, conversion cost is added evenly during the process, and direct materials are added at the end of the process. Detection of spoiled units are at the end of the process. All spoiled units are disposed of at zero net disposal value. All completed work is transferred to the next department.

The data below is for the month of August 2019.The transferred in cost for August is the total cost of good units completed and transferred out in August from the assembly department.

Packing Department	Physical Units	Transferred-in Cost (RM)	Direct Materials (RM)	Conversion Cost (RM)
W.I.P, beginning Inventory, August 1	13,500	35,000	0	24,600
Degree of completion of beginning W.I.P		100%	0%	70%
Units started on August	25,500
Units completed and transferred out	28,500
W.I.P, ending inventory, August 31	8,500
Degree of completion of ending W.I.P		100%	0%	40%
Cost added in August:			10,500	55,500
Transferred in from Assembly		100,500
Normal spoilage (%) of good units	6%
Degree of completion of normal spoilage			100%	100%
Degree of completion abnormal spoilage			100%	100%

Required:

1. Explain the terms normal spoilage and abnormal spoilage and how does the accounting for these two types of spoilage differ under process costing?

(4 marks)

2. For the packing department, use the FIFO method to:

1. Compute the equivalent units of production and the total unit cost.

(12 marks)

2. Assign the costs to units completed and transferred out including normal spoilage, abnormal spoilage and to units in ending inventory.

(9 marks)

(Total 25 marks)