AFM481 Final: Chapter 18 Example Problems
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(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?
This is for E18-17 in Horngren's Cost Accounting ISBN: 978-0-13-342885-8
Weighted Average method, spoilage, equivalent units. Consider the following data for November 2014 from Gray Manufacturing Company, which makes silk pennants and uses a process-costing system. All direct materials are added at the begining of the process, and convernsion costs are added evenly during the process. Spoilage is detected upon inspection at the completion of the process. Spoiled units are disposed of at zero net disposal value. Gray Manufacturing uses weighted-average method of process costing.
Physical Units | Direct Materials | Conversion costs | |
work in process Nov. 1(a) | 1000 | 1423 | 1110 |
started in Nov. 2014 | ? | ||
Good units completed and transferred out during Nov. 2014 | 9000 | ||
Normal Spoilage | 100 | ||
Abnormal spoilage | 50 | ||
Work In Process, Nov. 30(b) | 2000 | ||
Total Costs added During Nov. 2014 | 12180 | 27750 |
(a) degree of completion: direct materials, 100%; conversion costs, 50%
(b) degree of completion; direct materials, 100%; conversion costs, 30%
Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule.
Flow of Production | Physical Units |
Work in Process, Beginning | |
Started During Current Period | |
To account for | |
Completed and Transferred Out During current period | |
Normal Spoilage | |
Abnormal Spoilage | |
Work in process ending | |
Accounted for | |
equivalent units of work done to date |
The following questions are extension of E18-17
E18-18 Weighted-average method, assigning costs
For the data in exercise 18-17, summarize the total costs to account for; calculate the cost per equivalent unit for direct materials and conversion costs; and assign costs to units completed and transferred out(including normal spoilage), to abnormal spoilage and to units in ending work in process inventory
E18-19 FIFO method, spoilage, equivalent units. Refer to the information in E18-17. Suppose Gray Manufacturing Company uses the FIFO method of process costing instead of the weighted average method. Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule.
E18-20 FIFO method, assigning costs
For the data in E18-17, use the FIFO method to summarize the totals costs to account for; calculate the cost per equivalent unit for direct materials and conversion costs; and assign costs to units completed and transferred out(including normal spoilage) to abnormal spoilage, and to units in ending work in process.