A.$6179.79 450 $111,235.71 370 350 $22,584.52 0 $6,179.76 $5.54 $140,000 500 400
ID: 2590599 • Letter: A
Question
A.$6179.79
450
$111,235.71
370
350
$22,584.52
0
$6,179.76
$5.54
$140,000
500
400
$22,500
$6.82
Inter Manufacturing Company manufactures expensive chairs. The following data relates to the month of January 20x1. Units Beginning Work in Process (1-1-x1) 2,000 Added during the month 10,000 Completed and transferred out (CTO) 9,000 Ending Work in Process (31-1-x1) 2,500 Percentage of Completion Beginning Work in Process (1-1-x1) 60% Ending Work in Process (31-1-x1) 40% Costs added during January Total costs Beginning Work in Process (1-1-x1) $20,000 Costs added during January $120,000 Conversion costs Beginning Work in Process (1-1-x1) $5,800 Costs added during January $52,400 The company uses Weighted Average Process Costing Method and materials are added at the beginning of process. The inspection point for spoilage units occurs at the end of production process Spoilage is considered abnormal if it is greater than 6% of CTOA.$6179.79
B.450
C.$111,235.71
D.370
E.350
F.$22,584.52
G.0
H.$6,179.76
I.$5.54
J.$140,000
K.500
L.400
M.$22,500
N.$6.82
Explanation / Answer
Solution:
Part 1 – Calculation of Normal Spoilage:
WE need to prepare the Physical Unit flow
Input
Physical Units
Output
Physical Units
Beginning Work in process
2000
Completed and Transferred out (CTO)
9,000
Current period Units Added
10,000
Ending Work in Inventory
2,500
Normal Spoilage
500
Abnormal Spoilage
0
Total
12,000
12,000
Total Units processed in Work in Process = Beginning + Added during the month = 2000 + 10,000 = 12,000
Completed and Transferred out (CTO) = 9,000 Units
Ending Work In Process Inventory = 2,500
Total Loss Units = 12,000 – 9,000 – 2,500 = 500 Units
% of loss on CTO = 500 Units / 9000 Units x 100 = 5.556%
It is mentioned in the question that Spoilage is considered abnormal if it is greater than 6% of CTO. It means Spoilage Upto 6% of CTO is considered as Normal Spoilage.
Hence, the 500 Units are within 6% of CTO. It is treated as Normal Spoilage Units
Normal Spoilage = 500 Units (This is the answer is first part of question)
Part 2 – Abnormal Spoilage
As calculated above, the all spoilage units are normal spoilage. Hence there is no Abnormal Spoilage Unit
Abnormal Spoilage Unit = 0
Part 3 – The cost of Normal Spoilage Unit
Spoilage is a waste or scrap arising in the production process. Spoilage term is most commonly applied to the raw materials. Normal Spoilage is a standard amount of waste or scrap that is caused by production, and which is difficult to avoid.
In accounting, normal spoilage is included in the standard cost of goods completed.
Hence, the cost of normal spoilage is absorbed by the good units.
Therefore, the Cost of Normal Spoilage = 0
Part 4 – The cost of Ending Work IN Process = $36,425
To calculate this part, we need to understand the weighted average method of process costing and the treatment of cost under this method.
Weighted Average (Average Cost) Method
Physical Units Count
Under this method the percentage completion done in the Beginning Inventory is ignored while calculating the equivalent completed units during the current period. Beginning Inventory Units are treated as fresh units introduced for production.
Cost Accounted for:
- The cost of opening work-in-progress and cost of the current period are aggregated and the aggregate cost is divided by output in terms of completed equivalent units.
- The units of Beginning Inventory of WIP and their cost are taken in full under this method
Ending Inventory
The Ending Inventory of WIP is valued at total cost i.e. Cost added during the month/period and Cost of Beginning WIP.
Calculation of Equivalent Unit of Production and Cost per Equivalent Unit
Units to be assigned cost:
Equivalent Units
Whole Units
Direct Material
Conversion Costs
Completed and Transferred out (CTO) (100% Complete)
9,000
9,000
9,000
Normal Spoilage
500
0
0
Ending Work in Process (40% complete for conversion)
2,500
2,500
1,000
Total units to be assigned cost
12,000
11,500
10,000
Cost Information
Direct materials
Conversion
Cost per Equivalent Unit:
Total Cost including beginning inventory cost
$140,000
$58,200
Total equivalent units
11,500
10000
Cost per Equivalent Unit (2)
$12.17
$5.82
Allocated Costs to Ending Work In Process
Allocated Material Cost to Ending Inventory
(Equivalent Unit of Ending Inventory with respect to material x Material Cost per equivalent unit)
$30,425
(2,500 Units x $12.17)
Allocated Conversion Cost to Ending Inventory
(Equivalent Unit of Ending Inventory with respect to conversion x Conversion Cost per equivalent unit)
$5,820
(1,000 Units x $5.82)
Total Cost allocated to Ending Inventory
$36,425
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Input
Physical Units
Output
Physical Units
Beginning Work in process
2000
Completed and Transferred out (CTO)
9,000
Current period Units Added
10,000
Ending Work in Inventory
2,500
Normal Spoilage
500
Abnormal Spoilage
0
Total
12,000
12,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.