Lillputian Inc. produces dog food. All direct material is entered at the beginni

Question

Lillputian Inc. produces dog food. All direct material is entered at the beginning of the process. Some shrinkage occurs during the production process, but management considers any shrinkage of less than 8 percent to be normal. October 2010 data are as follows:

Beginning WIP inventory (45% complete as to conversion) 36,000 pounds
Started during the month                                              120,000 pounds
Transferred to FG inventory                                           126,000 pounds
Ending WIP inventory (15% complete as to conversion)       21,600 pounds
Loss                                                                                        ? pounds

The following costs are associated with October production:

Beginning WIP inventory:
Material                      $14,000
Conversion                   10,800             $24,800
Current period:
Material                      $39,060
Conversion                   33,912              72,972
Total cost to account for                      $97,772

Prepare an October 2010 cost of production report for Lilliputian Inc. using FIFO process costing.


Here Lillputian Inc. produces dog food. All direct material is entered at the beginning of the process. Some shrinkage occurs during the production process, but management considers any shrinkage of less than 8 percent to be normal. October 2010 data are as follows:

Beginning WIP inventory (45% complete as to conversion) 36,000 pounds
Started during the month                                              120,000 pounds
Transferred to FG inventory                                           126,000 pounds
Ending WIP inventory (15% complete as to conversion)       21,600 pounds
Loss                                                                                        ? pounds

The following costs are associated with October production:

Beginning WIP inventory:
Material                      $14,000
Conversion                   10,800             $24,800
Current period:
Material                      $39,060
Conversion                   33,912              72,972
Total cost to account for                      $97,772

Prepare an October 2010 cost of production report for Lilliputian Inc. using FIFO process costing.


Here

Explanation / Answer

Hey Ms Packman, You calculated the equivalent units correctly.However there is an element of abnormal loss which you somehow missed . It has been calculated as below :
Now , the cost for the month has been calculated as below : Beginning Inventory
36,000.00 Started during the month
120,000.00 Less : Transferred to FG
(126,000.00)

30,000.00 Less:Normal Loss 8%
2,400.00

27,600.00 However CWIP
21,600.00 Abnormal Loss
6,000.00

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