Weighted-average method, inspection at 80%completion. (A. Atkinson) The Horsheim Company is afurniture manufacturer with two departments: molding andfinisihing. The company uses the weighted-average method of processcosting. In August, the following data were recorded for thefinishing department:
Units of beginning work in processinventory 25,000
% of completion of beginning work in processunits 25%
Cost of direct materials in beginning work inprocess $0
Units started 175,000
Units completed 125,000
Units in ending inventory 50,000
% completion of ending WIP units 95%
Spoiled units 25,000
Total costs added during current period:
Directmaterials $1,638,000
Direct MFGlabor $1,589,000
MFG OH $1,540,000
WIP, beginning:
Transferred-incosts $207,250
Conversioncosts $105,000
Cost of units transferred in during currentperiod $1,618,750
Conversion costs are added evenly during the process. Directmaterial costs are added when production is 90% complete. Theinspection point is at the 80% stage of production. Normal spoilageis 10% of all good units that pass inspection. Spoiled units aredisposed of at zero net disposal value.
1. For August, summarize total costs to account for and assignthese costs to units completed and transferred out (includingnormal spoilage), to abnormal spoilage, and to units in ending workin process.
2. What are the managerial issues involved in determining thepercentage of spoilage considered normal? How would your answer torequirement 1 differ if all spoilage were treated as normal?
Weighted-average method, inspection at 80%completion. (A. Atkinson) The Horsheim Company is afurniture manufacturer with two departments: molding andfinisihing. The company uses the weighted-average method of processcosting. In August, the following data were recorded for thefinishing department:
Units of beginning work in processinventory 25,000
% of completion of beginning work in processunits 25%
Cost of direct materials in beginning work inprocess $0
Units started 175,000
Units completed 125,000
Units in ending inventory 50,000
% completion of ending WIP units 95%
Spoiled units 25,000
Total costs added during current period:
Directmaterials $1,638,000
Direct MFGlabor $1,589,000
MFG OH $1,540,000
WIP, beginning:
Transferred-incosts $207,250
Conversioncosts $105,000
Cost of units transferred in during currentperiod $1,618,750
Conversion costs are added evenly during the process. Directmaterial costs are added when production is 90% complete. Theinspection point is at the 80% stage of production. Normal spoilageis 10% of all good units that pass inspection. Spoiled units aredisposed of at zero net disposal value.
1. For August, summarize total costs to account for and assignthese costs to units completed and transferred out (includingnormal spoilage), to abnormal spoilage, and to units in ending workin process.
2. What are the managerial issues involved in determining thepercentage of spoilage considered normal? How would your answer torequirement 1 differ if all spoilage were treated as normal?
Related questions
(spoilage) Elegant, USA manufactures steeringwheel covers for various brands of luxury cars. At its Jamaica,plant direct materials and the conversion costs are added evenlyduring the process. Given the importance of minimizing productreturns, spoiled units are detected upon inspection at variouslevels of the production process and are discarded at a netdisposal value of zero.
The following data summarizes the mostrecent Elegant USA uses the FIFO method of accounting for spoilageand the numbers for the production pr Based on the followingnumbers respond the question
Physical Units | Direct Material | Conversion Costs | |
Beginning Inventory | 2500 | $ 23,450 | $ 22,312 |
Degree of Completion of Beginning WIP | 100% | 80% | |
Costs Added in Current Month | $ 123,075 | $ 132,500 | |
Started during the current month | 14,000 | ||
Good Units Completed and Transferred Out during the month | 11,000 | ||
WIP, Ending Inventory | 3,750 | ||
Degree of Completion of Ending WIP | 100% | 70% | |
Total Costs Added during the month | |||
Normal Spoilage | 1000 | ||
Degree of Completion of Normal Spoilage | 90% | 70% | |
Abnormal Spoilage | 750 | ||
Degree of completion of abnormal spoilage | 60% | 90% |
Required:
Using the FIFO method
Calculate equivalent units.
Determine the total costs to account for;
calculate the cost per equivalent unit for each costcategory;
assign costs to units completed and transferred out
determine the value of normal spoilage and abnormal spoilage,and
determine the dollar value of the units in ending work inprocess.
What are the managerial issues involved in selecting orreviewing the percentage of spoilage considered normal?
Harmon Company uses the weighted average method in its processcosting system. The Curing Department of Harmon Company reportedthe following information for the month of November
Work in process, beginning | |
Units in process, November 1 | 10,000 |
Stage of completion with respect toconversion | 80% |
Costs in the beginninginventory: | |
Materials cost | $34,500 |
Conversion costs | $48,600 |
Units started into production during the month | 28,000 |
Units completed and transferred out | 30,000 |
Costs added to production during the month: | |
Materials cost | $146,000. |
Conversion cost | $194,400 |
Work in process, ending: | |
Units in process, November 30 | 8,000 |
State of completion with respect toconversion | 30% |
ALL MATERIALS ARE ADDED AT THE BEGINNING OF THEPROCESS
Required:
Complete the sections below.
Determine equivalent units of production
Equivalent Units
Materials | Conversion | |
Transferred to next department | ||
| Ending Work in Process: Materials Conversion | ||
Equivalent Units of Production |
Compute the costs per equivalent unit
Equivalent Units
Materials | Conversion | |
Cost of beginning work in process | ||
Cost added during the period | ||
Total Cost | ||
Equivalent units of production | ||
Cost per equivalent unit |
Determine the total cost of ending work in process inventory andthe total cost of units transferred to the next process
Materials | Conversion | Total | |
| Ending work in process inventory: Equivalent units of production Cost per equivalent unit Cost of ending work in process inventory | |||
| Units completed and transferred out: Units transferred to next department Cost per equivalent unit Costs of units completed & transferred out |
Prepare a report that reconciles the total costs assigned to theending work in process inventory and the units transferred out withthe costs in beginning inventory and costs added during theperiod
| Costs to be accounted for: Cost of beginning work in process inventory Costs added to production during the period Total cost to be accounted for: | |
| Costs accounted for as follows: Cost of ending work in process inventory Cost of units completed and transferred out Total cost accounted for |
