Question

Weighted-Average Process Costing; Spoilage (Appendix) Carson Paint Company, which manufactures quality paint to sell at premium prices, uses a single production department. Production begins by blending the various chemicals that are added at the beginning of the process and ends by filling the paint cans. The gallon cans are then transferred to the shipping department for crating and shipment. Labor and overhead are added continuously throughout the process Factory overhead is applied at the rate of s3 per direct labor dolla: The company combines labor and overhead in computing product cost. Prior to May, when a change in the manufacturing process was implemented, work-in-process inventories were insignificant. The changed manufacturing process, which has resulted in increased equipment capacity, allows increased production but also results in considerable amounts of work-in-process inventory. Also, the company had 1,000 spoiled gallons in May one-half of which was normal spoilage and the rest abnormal spoilage. The product is inspected at the end of the production process These data relate to actual production during the month of May

Answer 1

1.

Cost of Prduction report (weighted avg metghod)
ProductionDepartment		Equivalent Units
Flow Of Units	Physical Units	Direct Material	Conversion Cost
Units to be accounted for
Beginning work in process inventory	2,000.00
Units started this period	30,000.00
Total u nits to be accounted for	32,000.00
Units accounnted for:
Completed and transferred out (b)	24,500.00	24,500.00	24,500.00
Normal spoilage (500*100%)	500.00	500.00	500.00
Abnormal spoilage (500*100%)	500.00	500.00	500.00
Ending work in progress inventory© 100% comple for material and 80% for conversion	6,500.00	6,500.00	5,200.00
Total units to be accounted for (f)	32,000.00	32,000.00	30,700.00
Flow of Cost
Cost in the begnning work in progress inventory	69,250.00	58,750.00	10,500.00
Begiining and cost added to process	392,000.00	346,600.00	45,400.00
Total Cost to be accounted for (e)	461,250.00	405,350.00	55,900.00
Cost per equivalent unit (a)    (e/f)	14.49	12.67	1.82
Cost accounted for
Cost assigned to units transferred out (a*b)	354,957.00	310,346.00	44,611.00
Cost in ending work in progress inventory (a*c)	91,805.00	82,337.00	9,468.00
Total Cost accounted for	446,762.00	392,683.00	54,079.00

2.Yes its a proper move because in long run increase in capacity will lead to increase in production which in turn will increase sales which will be beneficial for the company as higher revenue will be generated. Because of more production, there will be the increase in work in process which is normal. Necessary steps must be taken to increase the sales units so we can have the benefit of increased capacity.

3. Change in the manufacturing process will affect the sustainability performance because there is increased capacity or due to change in process, there is more production than company by selling this production can earn revenue which is long-term and helps in improving sustainability.