Question

Giddings Pharmaceutical Company is a maker of drugs for high blood pressure and uses a process costing system. The following information pertains to the final department of Giddings's blockbuster drug called Solcax. Beginning work-in-process (40% completed) Transferred-in Normal spoilage Abnormal spoilage Good units transferred out Ending work-in-process (1/3 completed) Conversion costs in beginning inventory Current conversion costs 625 units 3,300 units 365 units 165 units 2,900 units 495 units $3,147 $6,200 Giddings calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of Solcax that are spoiled are the result of defects not discovered before inspection of finished units. Materials are added at the beginning of the process. Using the weighted-average method, answer the following question: What are the total conversion costs in ending inventory?

Answer 1

			Physical	Conversion
UNITS			Units	Equiv. Units
Units to account for:
Beginning work in process	625
Started in production	3300
Total Units to account for	3925
Units Accounted for:
Completed and transferred	2900	2900
Normal Spoilage		365	365
Abnormal Spoilage		165	165
Ending work in process	495	165
Total Units to be accounted for	3925	3595
				Conversion
COSTS				Cost
Costs to account for:
Beginning work in process		3147
cost added during the period		6,200
Total cost to account for		9,347
Divided by: Total EUP		3595
Cost per equivalent unit		2.6
Conversion cost in Ending WIP (165 Eup @2.60):	429
Answer is $ 429.