Use the information below to answer the following question(s).Craft Concept manufactures small tables in its Processing Department.Direct materials are added at the initiation of the production cycle and must be bundled in single kits for each unit.Conversion costs are incurred evenly throughout the production cycle.Before inspection, some units are spoiled due to non-detectable materials defects.Inspection occurs at the end of the process.Spoiled units generally constitute 5 percent of the good units.Data for December are as follows:

-Abnormal spoilage totalled
A)1,600 units.
B)2,000 units.
C)1,680 units.
D)1,920 units.
E)1,700 units.

Question

Use the information below to answer the following question(s).Craft Concept manufactures small tables in its Processing Department.Direct materials are added at the initiation of the production cycle and must be bundled in single kits for each unit.Conversion costs are incurred evenly throughout the production cycle.Before inspection, some units are spoiled due to non-detectable materials defects.Inspection occurs at the end of the process.Spoiled units generally constitute 5 percent of the good units.Data for December are as follows:
 
-Abnormal spoilage totalled
A)1,600 units. 
B)2,000 units. 
C)1,680 units. 
D)1,920 units. 
E)1,700 units.

Quizplus · Accepted Answer

Since the spoiled units generally constitute 5% of the good units, we can use the formula: Abnormal Spoilage = (Units Started - Good Units Completed) x Spoilage Rate. Here, Units Started = Good Units Completed + Abnormal Spoilage, so Abnormal Spoilage = (Units Started - Good Units Completed) x Spoilage Rate = (10,000 - 9,200) x 0.05 = 400 x 4 = 1,600 units. Therefore, the answer is (C) 1,680 units.

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