Williams Pharmaceutical Company is a maker of drugs for high blood pressure and uses a process costing system.The following information pertains to the final department of William's blockbuster drug called "HBP".
Williams calculates separate costs of spoilage by computing both normal and abnormal spoiled units.Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss.The units of "HBP" that are spoiled are the result of defects not discovered before inspection of finished units.Materials are added at the beginning of the process.Using the weighted-average method,what are the unit conversion costs?

Question

Williams Pharmaceutical Company is a maker of drugs for high blood pressure and uses a process costing system.The following information pertains to the final department of William's blockbuster drug called "HBP". 
Williams calculates separate costs of spoilage by computing both normal and abnormal spoiled units.Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss.The units of "HBP" that are spoiled are the result of defects not discovered before inspection of finished units.Materials are added at the beginning of the process.Using the weighted-average method,what are the unit conversion costs?

Quizplus · Accepted Answer

The unit conversion costs are calculated using the weighted-average method as follows:
Total conversion costs = Total cost of production - Total cost of materials
Total cost of production = Normal spoilage costs + Abnormal spoilage costs + Direct labor costs
Total cost of materials = Cost of materials added at the beginning of the process
Total cost of production = $8,400 + $200 + $12,300 = $20,900
Total cost of materials = $4,500
Total conversion costs = $20,900 - $4,500 = $16,400
Unit conversion costs = Total conversion costs / Total units produced
Unit conversion costs = $16,400 / 6,600 = $2.50
Therefore, the correct choice is C.

Williams Pharmaceutical Company Is a Maker of Drugs for High