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Quality Feeds Inc manufactures animal feed using a two-stage manufacturing system which Combines various nutritional Inputs as the feed goes through the cooking process in

Quality Feeds Inc manufactures animal feed using a two-stage manufacturing system which Combines various nutritional Inputs as the feed goes through the cooking process in department 1. Process 2 involves removing the moisture to allow for the dry feed to be prepared as pellets and bagged for the market. Nutritional material is added at various stages during process 1. The information presented below is for process 1. The organization uses the First In First Out method for inventory valuation.

Physical units (kg) Direct Materials Conversion Cost
Work in process July 01. Degree of completion materials 35%, conversion 50% 50,000 $190,000 $162,000
Started in July 700,000
Normal spoilage 5% of inputs in the month. Materials 50% and conversion 30%
Good units completed and transferred out in July ?
Work in process December 31. Degree of completion, materials 80,% conversion 60% 75,000
Cost added during July $ 1,450,000 $ 1,720,000
Spoiled units are 70% complete as to materials and 65% conversion as a result of broken transfer hose . 15,000

The normal spoiled units result evaporation and binding to the pans as the cooking process is being completed.

Question 1 contd

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Prepare a process costing work sheet using FIFO. (20 Marks)

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