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 5% of the good units. Data provided for February 2017 are as follows:

What are the total costs of all the units that were started during February and subsequently shipped before the end of the period? (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 5% of the good units. Data provided for February 2017 are as follows:

What are the total costs of all the units that were started during February and subsequently shipped before the end of the period? (Round any cost per unit calculations to the nearest cent.)

Quizplus · Accepted Answer

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Total Cost per equivalent unit = $2.40 + $1.49 = $3.89
Normal spoilage = 5% × 181,000 units = 9050 spoiled units
Abnormal spoilage = (51,600 units + 170,400) - (181,000 units + 26,300) - 9050 = 5650 units
* (181,000 - 51,600)+ 9050 + 5650 + 26,300 = 170,400 units
** ((100% - 50%) x 51,600) + 181,000 - 51,600 + 9050 + 5650 + (26,300 x 30%) = 177,790 units
Normal Spoilage =9050 units × $3.89 = $35,204.50
Abnormal Spoilage = 5650 units × $3.89 = $21,978.50
Direct materials: 26,300 units × $2.40 = $63,120
Conversion costs: 26,300 units × 0.3 × $1.49 = $11,756
Costs related to Beginning WIP:
Costs Carried Forward from Previous period = $280,300 + $80,100 = $360,400
Additional Conversion Cost = 51,600 units × (100 - 50%) × $1.49 = $38,442
Total = $398,842
Costs related to units that were started and completed in the period:
Started and Completed = Shipped Units less beginning Inventory
= 181,000 - 51,600 = 129,400 units
Cost = 129,400 units × $3.89 = $503,366

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