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 good units completed is:
A) $-0-
B) $20.00
C) $24.00
D) $23.55

Question

Quizplus · Accepted Answer

Step 1: Calculate the cost of materials placed into production
15,000 units x $20 per unit = $300,000

Step 2: Calculate the cost of good units completed
11,000 units completed / (1 - 15%) normal spoilage rate = 12,941 total units including normal spoilage
$300,000 cost of materials placed into production / 12,941 total units = $23.18 per unit
11,000 good units completed x $23.18 per unit = $254,980 cost of the good units completed

Step 3: Calculate the unit cost assigned to the good units completed
$254,980 cost of good units completed / 11,000 good units completed = $23.55 unit cost assigned to good units completed

Therefore, the answer is D.

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