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 total conversion costs transferred to finished goods?

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 total conversion costs transferred to finished goods?

Quizplus · Accepted Answer

The total conversion costs transferred to finished goods can be calculated by adding the conversion costs incurred during the period to the equivalent units of production and multiplying the total by the cost per equivalent unit.

Conversion costs incurred during the period = $2.50 x (2,700 + 300) = $7,500
Equivalent units of production = 2,400
Cost per equivalent unit = ($2,700 + $300 + $4,500) / 2,400 =  $2.25

Total conversion costs transferred to finished goods = 2,400 x $2.25 = $5,400
Therefore, the correct choice is D, $7,500.

Williams Pharmaceutical Company Is a Maker of Drugs for High