Question

The Scooter Company uses a process cost system for making scooter wheels. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of October the work-in-process is 40 percent complete and at the end of the month it is 60 percent complete. Spoilage is detected at the end of the process. Other data for the month include:

Required:

1) Prepare a production cost worksheet assuming that spoilage is recognized and the weighted average method is used.

2) Prepare journal entries to record transferring out of cost from the work-in-process accounts.

Column1	Column2	Column3	Column4	Column5
Beginning work-in-process inventory 1,600 units
Units started 20,000 units
Units placed in finished goods 12,000 units
Ending work-in-process inventory 1,200 units
Normal spoilage % on all units finished 20 percent
Conversion costs $40,320
Cost of direct materials $40,000
Beginning work-in-process costs:
Materials $4,000
Conversion $4,032

Answer 1

Production Worksheet Direct Material Conversion Cost %of %of Completion units Flow of Production Beginning Work in process invento Units Started Total Units to be accounted for Whole Units Completionunits 1,600 20,000 21,600 Good units completed and transferred out during the current period Normal Spoilage Abnormal Spoilage Ending Work in process invento Total Unit Accounted for Equivalent units Working Notes: Calculation of Spoliage Beginning Work in process invento Units Started Total Units accounted for Less: Finished goods Less: Ending work in process invento Toal Spoilage Normal spoilage 20% of finished goods i.e 12,000*20% Abormal Spoilage (Total Spoilage - Normal Spoilage) (8,400 -2,400) Total Spoilage 12,000 2,400 6,000 1,200 21,600 10012,000 100 100 100 2,400 6,000 1,200 100 100 60 10012,000 2,400 6,000 720 21,600 21,120 1,600 20,000 21,600 12,000 1,200 8,400 2,400 6,000 8,400

Production cost worksheet Total Direct materials Conversion costs Beginning work in process Cost added in current period A.Total Cost Incurred 8,032 80,320 88,352 4,000 40,000 44,000 4,032 40,320 44,352 21,600 2.037 B. Equivalent Units 21,120 2.100 C. Cost per equivalent Units (A/B Assignment of Cost Goods Unit completed and transferred out Direct material (12,000 2.037 Conversion Cost (12,000 2.100 Cost Before normal spoilage Normal Spoilage: Direct material (2,400 2.037 Conversion Cost (2,400 2.100 Cost of Normal Spoilage A .Total Cost of good units completed and transferred out 24,444 25,200 25,200 49,644 24,444 4,889 5,040 5,040 9,929 4,889 59,573 29,333 30,240

Abnormal spoilage Direct material (6,000 2.037 Conversion Cost (6,000 2.100 B. Cost of Abnormal Spoilage Ending Work in process: Direct material (1,200*2.037 Conversion Cost (720 2.100 C. Cost of Ending work in process 12,222 12,600 12,600 24,822 12,222 2,444 1,512 1,512 3,956 2,444 Total Cost (A+B+C 88,352 44,000 44,352 Journal Entry for transfer of goods General Journal Finished Goods Work in process Debit Credit 59,573 59,573