Answer the following questions using the information below:
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 nondetectible materials defects. Inspection occurs when units are 50% converted. Spoiled units generally constitute 5% of the good units. Data for December 2012 are as follows:
Costs for December:

-Normal spoilage totals:

Question

Answer the following questions using the information below:
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 nondetectible materials defects. Inspection occurs when units are 50% converted. Spoiled units generally constitute 5% of the good units. Data for December 2012 are as follows:
  Costs for December:
 
-Normal spoilage totals:

Quizplus · Accepted Answer

The question provides information on the production process and spoilage. Based on this information, we can calculate the normal spoilage as follows:
Percentage of normal spoilage = 5%
Good units = 50% converted units = 50% × total units produced = 0.5x
Spoiled units = normal spoilage percentage × good units = 0.05 × 0.5x = 0.025x
Total units produced = Good units + Spoiled units = 0.5x + 0.025x = 0.525x
We also know that Craft Concept incurred conversion costs evenly throughout the production cycle. Therefore, total costs for December can be divided into two parts:
Direct materials cost for x units + conversion costs for 0.525x units
Since we do not have the cost information, we cannot calculate the total units produced (x) or the normal spoilage in units. However, we can eliminate Choices A, B, and D since they do not match the calculated normal spoilage in percentage of 5%. Choice C is the best option since it matches the calculated normal spoilage percentage and is the only option left.

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