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 4% of the good units. Data provided for February 2017 are as follows:

What is the total 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 4% of the good units. Data provided for February 2017 are as follows:

What is the total 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

11ea1398_f0e1_fbeb_a1e4_e92d6a4bf47a_TB3027_00 
Total Cost per equivalent unit = $2.40 + $1.52 = $3.92
Normal spoilage = 4% × 180,000 units = 7200 spoiled units
Abnormal spoilage = (51,700 units + 170,400) - (180,000 units + 26,800) - 7200 = 8100 units
* (180,000 - 51,700)+ 7200 + 8100 + 26,800 = 170,400 units
** ((100% - 55%) x 51,700) + 180,000 - 51,700 + 7200 + 8100 + (26,800 x 25%) = 173,565 units
Normal Spoilage = 7200 units × $3.92 = $28,224.00
Abnormal Spoilage = 8100 units × $3.92 = $31,752.00
Direct materials: 26,800 units × $2.40 = $64,320
Conversion costs: 26,800 units × 0.25 × $1.52 = $10,184
Costs related to Beginning WIP:
Costs Carried Forward from Previous period = $280,000 + $80,400 = $360,400
Additional Conversion Cost = 51,700 units × (100% - 55%) x $1.52 = $35,363
Total = $395,763

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