Featured Exercise Tyler Company uses a process-costing system. Selected informat
ID: 2421549 • Letter: F
Question
Featured Exercise
Tyler Company uses a process-costing system. Selected information about the Molding Process for December 2010 follows:
Units
Beginning work in process, 60% complete as of 12/1/10
100
Transferred in
620
Normal spoilage
40
Abnormal spoilage
50
Good units completed and transferred out
550
Ending work in process, 75% complete as of 12/31/10
80
Conversion costs in beginning inventory
$160,000
Current period conversion costs
$960,000
Spoilage is detected when the units are inspected at the end of the process.
a. Using the weighted-average method:
(1) Compute equivalent units of conversion costs.
(2) Compute conversion costs per equivalent unit.
(3) Compute the conversion costs component of normal spoilage.
(4) Compute the conversion costs component of abnormal spoilage.
(5) Compute the total conversion costs transferred out to the next process.
(6) Compute the conversion costs component of ending work in process.
b. Using the FIFO method, repeat part (a). (Horngren 178-179)
Horngren, Charles T., Srikant Datar, Madhav Rajan. Student Study Guide for Cost Accounting. Pearson Learning Solutions, 2015-06-01. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.
Explanation / Answer
a
1.Equivalent units of conversion cost=Units transferred out+Abnormal spoilage+75% of closing stock
=550+50+.75*80=660
generally normal spoilage is not considered for calculation conversion cost per unit
2.conversion cost=begginning+current cost=$160,000+$960,000=$1,120,000
conversion cost per unit=$1,120,000/660=$1,696.97
3.conversion costs component of normal spoilage=Nil
4.conversion costs component of abnormal spoilage.=50*$1,696.97=$84,848
5.conversion costs transferred out to the next process=550*$1,696.97=$933,333
6.the conversion costs component of ending work in process=80*.75*1,695.97 =101,818
b. as per FIFO
1.equivalent units of conversion costs=100*.4+50+(550-100)+80*.75=550
2. conversion cost for current =$960,000
cost per unit=$960,000/600=$1,600
3.conversion costs component of normal spoilage=Nil
4.conversion costs component of abnormal spoilage=50*$1,600=$80,000
5.total conversion costs transferred out to the next process=450*$1,600+100*.4*$1,600+$160,000=$944,000
6. conversion costs component of ending work in process=80*.75*$1,600=$96,000
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