Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to undetectable material defects. Spoiled units generally constitute 3% of the good units. Data provided for February 2017 are as follows:

What are the direct material and conversion costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped? Take into account the costs related to the completion of the conversion of the units during the month. Use the FIFO method of process costing. (Round any cost per unit calculations to the nearest cent.)

Question

Samantha's Office Supplies manufactures desk organizers in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Inspection takes place as units are placed into production. After inspection, some units are spoiled due to undetectable material defects. Spoiled units generally constitute 3% of the good units. Data provided for February 2017 are as follows:

What are the direct material and conversion costs of all the units that were initially in the beginning work-in-process inventory and were subsequently shipped? Take into account the costs related to the completion of the conversion of the units during the month. Use the FIFO method of process costing. (Round any cost per unit calculations to the nearest cent.)

Quizplus · Accepted Answer

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Total Cost per equivalent unit = $2.39 + $1.53 = $3.92
Normal spoilage = 3% × 180,500 units = 5415 spoiled units
Abnormal spoilage = (51,200 units + 171,000) -(180,500 units + 26,300) - 5415 = 9985 units
* (180,500 - 51,200) + 5415 + 9985 + 26,300 = 171,000 units
** ((100% - 60%) x 51,200) + 180,500 - 51,200 + 5415 + 9985 + (26,300 x 30%) = 173,070 units
Normal Spoilage = 5415 units × $3.92 = $21,226.80
Abnormal Spoilage = 9985 units × $3.92 = $39,141.20
Direct materials: 26,300 units × $2.39 = $62,857
Conversion costs: 26,300 units × 0.3 × $1.53 = $12,072
Beginning WIP:
Direct Material cost = $0
Conversion Cost = 51,200 units × 60% × $1.53 = $47,002

Samantha's Office Supplies Manufactures Desk Organizers in Its Processing Department