Question

Verer Custom Carpentry manufactures chairs in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After​ inspection, some units are spoiled due to undetectable material defects. Spoiled units generally constitute 4​% of the good units. Data provided for March 2017 are as​ follows:

​WIP, beginning inventory​ 3/1/2017	32,200 units
Direct materials​ (100% complete)
Conversion costs ​(85​% ​complete)
Started during March	70,300 units
Completed and transferred out	80,200 units
​WIP, ending inventory​ 3/31/2017	18,700 units
Direct materials​ (100% complete)
Conversion costs ​(70​% ​complete)
​Costs:
​ WIP, beginning​ inventory:
Direct materials	$70,500
Conversion costs	40,700
Direct materials added	105,000
Conversion costs added	128,160

What costs would be associated with normal and abnormal​ spoilage, respectively, using the FIFO method of process​ costing? (Round any cost per unit calculations to the nearest​ cent.)

Answer 1

Answest Given data: → veren custom carpentry manufactures chains in its processing depauitment → Direct material age included. → conversion cost are incurred evenly thorough out the production cycle. → Spoils units generally constitute 47 of the goods unit (1) Nogmal Spoilage - 80,200 x 4%. . 3208 units calculation of abnormal spoilage: Beginning wip inventary • 32,200 Add : Started desting the 70,300 year less: completed and transferred (80. god) out less. Ending wip inventooy . (18,400) less: Noormal Spoilage = (3208) - 392 units Abnouimal Spoilage.

Cii) Calculation of Spoilage cost Diorect material particulars conversion cost Nip, beginning inventory $ 1,05,000 $1,28,160 cost added during the Period $ 105,000 51.28. 160 Total cost to be accounted four Divided by 'equivalent • units 75,130 70.300 Equivalent units cost 1. TO 1.49 = Normal spoilage = 3208 X3.19 =10.233 Abnormal spoilage · 392 x 3.19 = 150. 48

Civi) Calculation of Equivalent units: pasticulas Diglect material Conversion Cost Beginning wip 4830 Inventosiy (32,200 157] and 48.000 48.000 started Completed Normal spoilage 3208 3208 392 392 Abnormal . spoilage closing wip inventoay 18.700 18.700 75, 130 Equivalent units 70,300