Tong, Inc. is a manufacturing company that uses a process costing system. All direct material is added at the start of the process, and spoilage is discovered at the end. During the first period of operations 15,000 units of material were placed into production at a cost of $20 each (ignore conversion costs for this process). Ending work in process was 2,000 units, good units completed totalled 11,000 units, and normal spoilage is 15% of the units surviving inspection. Inspection takes place after the units are completed.
The unit cost assigned to the abnormal spoilage is:
A) $-0-
B) $22.61
C) $20.00
D) $24.00

Question

Quizplus · Accepted Answer

Abnormal spoilage is calculated as the total spoilage minus normal spoilage. Normal spoilage is 15% of the units surviving inspection (11,000 good units), which is 1,650 units. Total spoilage is 2,000 units (15,000 started - 11,000 completed - 2,000 WIP). Abnormal spoilage is 2,000 - 1,650 = 350 units. The unit cost assigned to abnormal spoilage is the cost per unit of material, which is $20.00.

Tong, Inc Is a Manufacturing Company That Uses a Process Costing