Question: FIFO method, spoilage.
1. Do Exercise using the FIFO method.
2. What are the managerial issues involved in selecting or reviewing the percentage of spoilage considered normal? How would your answer to requirement 1 differ if all spoilage were viewed as normal?
Exercise: Weighted-average method, spoilage. LaCroix Company produces handbags from leather of moderate quality. It distributes the product through outlet stores and department store chains. At LaCroix's facility in northeast Ohio, direct materials (primarily leather hides) are added at the beginning of the process, while conversion costs are added evenly during the process. Given the importance of minimizing product returns, spoiled units are detected upon inspection at the end of the process and are discarded at a net disposal value of zero. LaCroix uses the weighted-average method of process costing. Summary data for April 2017 are as follows:
1. For each cost category, calculate equivalent units. Show physical units in the first column of your schedule.
2. Summarize the total costs to account for; calculate the cost per equivalent unit for each cost category; and assign costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process.