Silver Spoon Inc., is a manufacturer of kitchen utensils. They use a process cos
ID: 2450279 • Letter: S
Question
Silver Spoon Inc., is a manufacturer of kitchen utensils. They use a process costing system. They had the following activity in one of their departments during September:
Units in Beginning WIP: 37,500
Units started during the period: 155,000
Completed and transferred out: 175,000
Work in process, ending: 14,500
Final inspection of the units occurs at the end of the process. Silver spoon considers normal spoilage to be 1% of the good units (good units = units passing inspection). There is no resale value for spoiled units at Silver Spoon.
a. How many "spoiled units" were there, in total, for the month?
b. Compute the normal and abnormal spoilage, if any, for the month in units.
i. Normal spoilage:
ii. Abnormal spoilage:
c. Silver Spoon spreads the cost of normal spoilage over the units transferred out of the department. The cost of abnormal spoilage is charged to the income statement as a period cost.
If the cost per equivalent unit of production (including all material and conversion costs) for the month was $10.00,
i. what was the amount, in total, charged to the income statement during the month for abnormal spoilage?
ii. what was the final cost per unit of the 175,000 units transferred out of the department? (If necessary, round to two decimals.)
Explanation / Answer
a. How many "spoiled units" were there, in total, for the month?
spoiled units = Units in Beginning WIP + Units started during the period - Completed and transferred out - Work in process, ending
spoiled units = 37500 + 155000 - 175000 - 14500
spoiled units = 3000
b. Compute the normal and abnormal spoilage, if any, for the month in units.
i. Normal spoilage: = 1%* Completed and transferred out
Normal spoilage: = 1%*175000
Normal spoilage: = 1750
ii. Abnormal spoilage = spoiled units - Normal spoilage
Abnormal spoilage = 3000-1750
Abnormal spoilage = 1250
c. Silver Spoon spreads the cost of normal spoilage over the units transferred out of the department. The cost of abnormal spoilage is charged to the income statement as a period cost.
If the cost per equivalent unit of production (including all material and conversion costs) for the month was $10.00,
i. what was the amount, in total, charged to the income statement during the month for abnormal spoilage?
Total, charged to the income statement during the month for abnormal spoilage = Abnormal spoilage * cost per equivalent unit of production
Total, charged to the income statement during the month for abnormal spoilage =1250*10
Total, charged to the income statement during the month for abnormal spoilage = 12500
ii. what was the final cost per unit of the 175,000 units transferred out of the department? (If necessary, round to two decimals.)
Final cost per unit of the 175,000 units transferred out of the department = (Unit transferred out * cost per equivalent unit of production + normal spoilage * cost per equivalent unit of production )/Unit transferred out
Final cost per unit of the 175,000 units transferred out of the department = (175000*10 + 1750*10)/175000
Final cost per unit of the 175,000 units transferred out of the department = $ 10.10
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