Chapter 18, Problem 18.26E

FIFO method, spoilage.

1. 1. Do Exercise 18-25 using the FIFO method.

Required

1. 2. What are the managerial issues involved in selecting or reviewing the percentage of spoilage considered normal? Flow would your answer to requirement 1 differ if all spoilage were viewed as normal?

18-25 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: