MAHOGANY Corporation did a job specifically for Mayon Corporation only. The total normal spoilage units turns out to be 2,000 units and the total units produced was 22,000. The initial cost assigned before any inspection amounted to P550,000 direct materials, and P880,000 of direct manufacturing labor. Direct manufacturing labor is equivalent to 80% of manufacturing overhead allocated.

Fortunately, Mahogany Corporation found a buyer who will use the spoiled goods as his raw materials. The spoiled goods were sold at P50 per unit.


1. What is the cost of one good finished unit?

2. If the spoilage is abnormal, how much is the loss from abnormal spoilage account?

3. Assuming that the spoilage loss is charged to all production, what is the cost of one good finished unit?

4. Assume that a buyer needs the spoiled goods in his production and buys 1,500 units at P45 per unit, less 5% and 10%. Terms: 2/15, n/30. Freight of P5,000 was also paid and direct charging was used. If the buyer uses the net method for the cash discount, what shall be the cost of materials purchased?