Question

Universal Automotive Group is a maker of engines for high performance cars and uses a process costing system. The following information pertains to the final department of manufacturing for Universal's most popular engine, the "Atomic 8". Beginning work-in-process (40% completed) Transferred-in Normal spoilage Abnormal spoilage Good units transferred out Ending work-in-process (25% completed) Conversion costs in beginning inventory Current conversion costs 344 units 1,560 units 80 units 80 units 1,360 units 384 units $176,500 $679,980 Universal Automotive Group 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 the Atomic 8 that are spoiled are the result of defects not discovered before inspection of finished units. Using the weighted-average method, answer the following question: What are the total conversion costs of abnormal spoilage? Multiple Choice

Answer 1

			Physical	Conversion
UNITS			Units	Equiv. Units
Units to account for:
Beginning work in process	344
Started in production	1560
Total Units to account for	1904
Units Accounted for:
Completed and transferred	1360	1360
Normal Spoilage		80	80
Abnormal Spoilage		80	80
Ending work in process	384	96
Total Units to be accounted for	1904	1616
				Conversion
COSTS				Cost
Costs to account for:
Beginning work in process		176500
cost added during the period		6,79,980
Total cost to account for		8,56,480
Divided by: Total EUP		1616
Cost per equivalent unit		530
Conversion cost in Abnormal Spoilage (80 EUP @530):	42400
Answer is $ 42,400