Answer the following question(s)using the information below:
Hawk Ltd.uses process costing in its Fabricating Department.At the beginning of October, it had 12,000 units in beginning work-in-process that were 40% complete with respect to conversion.During October it put 87,000 units into production and completed 89,000 good units.At October 31, there were 3,000 units in ending work-in-process that were 70% complete with respect to conversion.Direct materials are added at the beginning of the process.Inspection occurs at the end of the process and normal spoilage is 6% of good output.Costs related to the beginning inventory were $36,800 for direct materials and $28,600 for conversion costs.During the month, the company issued $280,000 of direct materials and incurred $599,400 of conversion costs.
-What are the normal and abnormal spoilage units, respectively, for October assuming Hawk uses the weighted average method of process costing?
A)5,340 units; 1,660 units
B)7,000 units; 1,660 units
C)5,220 units; 1,780 units
D)5,340 units; 1,780 units
E)5,940 units; 1,060 units

Question

Quizplus · Accepted Answer

Total units accounted for = Beginning WIP + Units started - Good units completed - Ending WIP 
Total units accounted for = 12,000 + 87,000 - 89,000 - 3,000 = 7,000

To calculate normal spoilage, we need to calculate the total output, which is the good units completed plus the normal spoilage. Let X be the normal spoilage for October.

Total output = Good output + Normal spoilage 
Total output = 89,000 + X

We know that normal spoilage is 6% of good output. Hence,

X = 0.06 * 89,000 = 5,340 units

To calculate abnormal spoilage, we need to calculate the total units accounted for minus the total output.

Abnormal spoilage = Total units accounted for - Total output 
Abnormal spoilage = 7,000 - (89,000 + 5,340) = 1,660 units

Therefore, the normal and abnormal spoilage units, respectively, for October assuming Hawk uses the weighted average method of process costing are 5,340 units and 1,660 units. The answer is A.

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