Question

Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before​ inspection, some fillets are spoiled due to undetectable defects. Inspection occurs when units are​ 40% converted. Spoiled fillets generally constitute​ 6% of the good fillets. Data for April 2017 are as​ follows: ​WIP, beginning inventory​ 4/1/2017 ​ 85,000 fillets         Direct materials​ (100% complete)         Conversion costs​ (50% complete) Started during April ​134,000 fillets Completed and transferred out​ 4/30/2017 ​183,000 fillets ​WIP, ending inventory​ 4/30/2017 ​24,000 fillets         Direct materials​ (100% complete)         Conversion costs​ (25% complete) Costs for​ April:    ​ WIP, beginning​ Inventory:         Direct materials ​$140,000         Conversion costs ​105,910     Direct materials added ​309,000     Conversion costs added ​390,130 What cost is allocated to abnormal spoilage using the weightedaverage processcosting ​method? (Round any cost per unit calculations to the nearest​ cent.)

Answer 1

1.

• Units completed and trasferred out = 183,000 fillets DM (100 % completed) CC(100% completed)

equivalent units for DM= 183,000 , equivalent units for CC= 183,000

• WIP at the end= 24,000 fillets   DM (100 % completed) CC(25% completed)

equivalent units for DM= 24,000 , equivalent units for CC= 24,000 * 0.25=6,000

• spoilage= begining WIP units + units started in this periode - units completed and transferred out -ending WIP units=85,000 + 134,000- 183,000-24,000= 12,000 units
• Normal spoilage= 6% of good units

good units passed inspection include only good units completed (183,000) and transferred out.units WIP at the end will not include in inspection,it is not 40% completed

Normal spoilage= 6% of good units= .03 * 12,000= 10,980 DM (100 % completed) CC(40% completed)

equivalent units for DM= 10,980 , equivalent units for CC= 10,980 * 0.4=4392

• Abnormal spoilage= Total spoilage -Normal spoilage=12,000 -10980= 1020 units    DM (100 % completed) CC(40% completed)

equivalent units for DM= 1020 , equivalent units for CC= 1020 * 0.4=408

	Equivalent units for DM	Equivalent units for conversion cost
Units completed and transferred out 183,000	183,000	183,000
Normal spoilage	10,980	4392
Abnormal spoilage	1020	408
Ending WIP inventory	24,000	6,000
total	219,000	193,800

Total DM cost= DM cost of Begining WIP + DM cost added =140,000 +309,000=449,000

Total conversion cost=  CC cost of Begining WIP + CC cost added =105,910+ 390,130= 496,040

Direct material cost per unit= Total DM cost / total Equivalent units for DM=449,000 /219,000=2.05 per unit

Conversion cost per unit= Total conversion cost / total Equivalent units for conversion cost=496,040 / 193,800=2.56

DM Cost of Abormal spoilage= equivalent units for DM for abnormal spoilage *Direct material cost per unit= 1020 * 2.05=2,091

Conversion cost for abnormal spoilage= equivalent units for CC for abnormal spoilage *Conversion cost per unit= 408 * 2.56=1,044.5

Cost allocated to abnormal spoilage=DM Cost of Abormal spoilage+Conversion cost for abnormal spoilage= 2091 + 1044.5= 3,135.5

Cost allocated to abnormal spoilage= 3,135.5