Michael’s Pottery makes decorative garden pieces using three consecutive processes: Moulding, Baking & Spraying. Quality control check takes place during the process, at which point, rejected units are separated from good units. The following details relate to production for the month of October 2020, for the Baking Department. Work-in-process, October 1: -0- Transfer from Moulding: 2,000 units valued at $336.40 each Other manufacturing costs incurred during October: Direct material added Direct Manufacturing Wages Manufacturing Overhead Applied $202,120 $212,840 $306,160 Normal losses are estimated to be 5% of the units transferred in during the period. Losses from the Baking Department are deemed to be scrap and sold at $382 each. At inspection 300 decorative pieces were rejected as scrap. These units had reached the following degree of completion: From Moulding 100% Direct material added 40% Conversion costs 12½% 1,200 pieces were completed and transferred out to the Spraying Department. Work-in-process at the end of October had reached the following degree of completion: From Moulding 100% Direct material added 70% Conversion costs 55% Direct materials added and conversion costs are incurred uniformly throughout the process. Required: (e) Given that 25% of the unexpected losses were because of pilferage, prepare the abnormal spoilage statement, clearly showing Michael Pottery’s true loss. Use the attached template to answer the question.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity

Section: Chapter Questions

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Michael’s Pottery makes decorative garden pieces using three consecutive processes: Moulding, Baking & Spraying. Quality control check takes place during the process, at which point, rejected units are separated from good units. The following details relate to production for the month of October 2020, for the Baking Department.

Work-in-process, October 1: -0-
Transfer from Moulding: 2,000 units valued at $336.40 each

Other manufacturing costs incurred during October: Direct material added Direct Manufacturing Wages Manufacturing Overhead Applied $202,120 $212,840 $306,160

Normal losses are estimated to be 5% of the units transferred in during the period. Losses from the Baking Department are deemed to be scrap and sold at $382 each.
At inspection 300 decorative pieces were rejected as scrap. These units had reached the following degree of completion:

From Moulding 100%

Direct material added 40%

Conversion costs 12½%

1,200 pieces were completed and transferred out to the Spraying Department.

Work-in-process at the end of October had reached the following degree of completion: From Moulding 100%

Direct material added 70%

Conversion costs 55%

Direct materials added and conversion costs are incurred uniformly throughout the process. Required:

(e) Given that 25% of the unexpected losses were because of pilferage, prepare the abnormal spoilage statement, clearly showing Michael Pottery’s true loss. Use the attached template to answer the question.

e) Abnormal Spoilage Statement
Cost of Unexpected Losses

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