Miramar, Inc. uses a weighted-average process costing system which recognizes normal spoilage as 5% of good output. During the current period, 14,000 units were started and 10,000 units completed. Materials are added at the beginning of the process, conversion costs occur uniformly, and the inspection point is at the 70% point. Beginning work in process was 6,000 units, 40% complete, and ending work in process 9,000 units, 80% complete. The cost per equivalent unit for material was $1.00 and for conversion costs $3.00. The cost of goods completed was:
A)$41,550
B)$40,000
C)$40,816
D)$41,053

Question

Quizplus · Accepted Answer

The cost of goods completed is $41,550.The equivalent units of production are:Beginning work in process: 6,000 units x 40% = 2,400 unitsUnits started and completed: 10,000 unitsEnding work in process: 9,000 units x 80% = 7,200 unitsTotal equivalent units of production: 2,400 units + 10,000 units + 7,200 units = 19,600 unitsThe cost per equivalent unit is:Materials: $1.00 per unitConversion costs: $3.00 per unitThe cost of goods completed is:Materials: 10,000 units x $1.00 per unit = $10,000Conversion costs: 10,000 units x $3.00 per unit = $30,000Total cost of goods completed: $10,000 + $30,000 = $40,000The cost of normal spoilage is:5% of 10,000 units = 500 unitsCost of normal spoilage: 500 units x ($1.00 per unit + $3.00 per unit) = $2,000The total cost of goods completed is:$40,000 + $2,000 = $42,000Less: Beginning work in process inventory:6,000 units x ($1.00 per unit + $3.00 per unit) = $24,000Cost of goods completed: $42,000 - $24,000 = $18,000