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 20x3 are as follows:

WIP, beginning inventory 12/1/20x3 10,000 units
Direct materials (100% complete)
Conversion costs (75% complete)
Started during December 40,000 units
Completed and transferred out 12/31/20x3 38,400 units
WIP, ending inventory 12/31/20x3 8,000 units
Direct materials (100% complete)
Conversion costs (65% complete)
Costs for December:
WIP, beginning Inventory:
Direct materials $50,000
Conversion costs 30,000
Direct materials added 100,000
Conversion costs added 140,000

Required:
a. What is the number of total spoiled units?
b. What is the normal spoilage totals?
c. What is the abnormal spoilage totals?

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Tundexi Tundexi · Answer 1 · 2021-05-20T03:22:57+02:00

Answer:

1. Particulars Amount

Beginning Inventory 10,000

Add: Started during December 40,000

Less: Completed and transferred out 38,400

Balance that should have been (of WIP ending) 11,600

Less: WIP ending actual balance 8,000

Total Spoiled Units 3,600

2. Completed and transferred out = 38,400 units

Normal spoilage = 38,400 units * 5% Normal Loss

Normal spoilage = 1,920 units

3. Abnormal Loss Unit = Total Spoiled Units - Normal Loss units

Abnormal Loss Unit = 3,600 units - 1,920 units

Abnormal Loss Unit = 1,680 units