Question

18-29 LogicCo is a fast growing manufacturer of computer chips. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of this product are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value. LogicCo uses the weighted average method of process costing.

Summary data for September 2017 are as follows:

	Physical units	Direct materials	Conversion costs
Work in process, beginning inventory	900	$125,766	$10,368
Degree of completion of beginning work in proces		100%	30%
Started during September	2,754
Good units completed and transferred out during September	2,500
Work in process, ending inventory	490
Degree of completion		100%	10%
Total costs added during September		$619,650	$253,098
Normal spoilage as a percentage of good units	15%
Degree of completion of normal spoilage		100%	100%
Degree of completion of abnormal spoilage		100%	100%

1. For each cost category, compute equivalent units. Show physical units in the first column of your schedule.

2. Summarize the total costs to account for; calculate the cost per equivalent unit for each cost category; and assign costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process.

Answer 1

Logic Co
Equivalent Units
Flow of Production	Physical Units	Direct Material	Conversion
Work in Process beginning	900
Started during September	2754
To Account for	3654
Goods units completed and transferred out during the current period	2500	2500	2500
Normal Spoilage(2500*15%)	375	375	375
Abnormal spoilage(289*100%)	289	289	289
Ending Work in Process(490*100%),(490*10%)	490	490	49
Equivalent Units	3654	3654	3213
Total Spoilage
Beginning Work in Process	900
Started during September	2754
Goods completed & Transferred out	-2500
Less: Closing Work in Process	-490
Total Spoilage	664
Less: Normal Spoilage	-375
Abnormal Spoilage	289
Total cost to be accounted for
	Total Production cost	Direct Material	Conversion
Beginning Work in Process	$         1,36,134.00	$    1,25,766.00	$           10,368.00
Cost added during the current period	$         8,72,748.00	$    6,19,650.00	$       2,53,098.00
Total cost to be accounted for	$      10,08,882.00	$    7,45,416.00	$       2,63,466.00
Cost incurred to date=(A)		$    7,45,416.00	$       2,63,466.00
Equivalent Units=(B)		3654	3213
Equivalent cost per unit=(Cost incurred to date/Equivalent units)=(A)/(B)		$             204.00	$                   82.00
Assignment of cost
Goods completed and transferred out(2500*$204),(2500*$82)	$         7,15,000.00	$    5,10,000.00	$       2,05,000.00
Normal Spoilage(375*$204),(375*$82)	$         1,07,250.00	$       76,500.00	$           30,750.00
Total cost of goods completed and transferred out=( C)	$         8,22,250.00	$    5,86,500.00	$       2,35,750.00
Abnormal Spoilage=(289*$204),(289*$82)=(D)	$            82,654.00	$       58,956.00	$           23,698.00
Ending Work in Process=(490*$204),(49*$82)=(E )	$         1,03,978.00	$       99,960.00	$             4,018.00
Total cost accounted for=(C )+(D)+(E )	$      10,08,882.00	$    7,45,416.00	$       2,63,466.00