Question

China Pacific Ltd. has a department that manufactures wooden horses. The following information is for the production of these wooden horses for the month of February: 

Work-in-process inventory, 1 Feb.           40,000 wooden horses 

   Direct materials cost: 100% complete $400,000 

   Conversion: 20% complete                  $460,000

Units started during February            60,000 wooden horses 

Units completed during February and Transferred out   80,000 wooden horses

 

Work-in-process inventory, 28 Feb            20,000 wooden horses 

    Direct materials:                                  100% complete 

    Conversion cost:                                    40% complete

Costs incurred during February 

    Direct materials                                   $200,000

    Conversion                                          $380,000 

Required: 

(a) Using the weighted-average method, calculate the following: 

(i) Costs per equivalent unit. 

(ii) Cost of goods completed and transferred out. 

(iii) Cost remaining in the ending work-in-process inventory. 

(b) Using the first-in first-out method, calculate the following: 

(i) Costs per equivalent unit. 

(ii) Cost of goods completed and transferred out. 

(iii) Cost remaining in the ending work-in-process inventory  

(c) Assume that you are the company’s financial controller. The production department’s February unit cost is higher than the standard cost. If the manager of the first department asks you to do him a favour by increasing the ending inventory completion percentage from 40 to 60 percent to lower the unit costs, what should you do? 

(d) Assume China Pacific Ltd. gives you the following information regarding operations for September 20x2: Total wooden horses manufactured 64,000 Wooden horses rejected as spoiled units 2,400 Total manufacturing cost $2,560,000 Assume the spoiled units have no disposal value. 

(i) What is the unit cost of making the 64,000 horse? 

(ii) What is the total cost of the 2,400 spoiled units? 

(iii)If the spoilage is considered normal, what is the increase in the unit cost of good horses manufactured as a result of the spoilage? 

(iv)If the spoilage is considered abnormal, prepare the journal entries for the spoilage incurred.