Question

MicroMem is a​ fast-growing manufacturer of computer chips. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of this product are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value. MicroMem uses the​ weighted-average method of process costing. Summary data for September 2017 are as​ follows:

	Physical Units (Computer Chips)	Direct Materials	Conversion Costs
Work in process, beginning inventory (September 1)	1,400	$ 117,532	$ 17,087
Degree of completion of beginning work in progress		100%	30%
Started during September	1,964
Good units completed and transferred out during September	2,200
Work in process, ending inventory (September 30)	540
Degree of completion of ending work in process		100%	25%
Total costs added during September		$ 575,452	$ 228,510
Normal spoilage as a percentage of good units	15%
Degree of completion of normal spoilage		100%	100%
Degree of completion of abnormal spoilage		100%	100%

1.	For each cost​ category, compute equivalent units. Show physical units in the first column of your schedule.
2.	Summarize the total costs to account​ for; calculate the cost per equivalent unit for each cost​ category; and assign costs to units completed and transferred out​(including normal​ spoilage), to abnormal​ spoilage, and to units in ending work in process.

Answer 1

1) Reconciliation
Particulars			Unit
WIP begninng			1400
unit started during the period			1964
unit to be accounted for			3364
unit completed & transfrrred out			2200
WIP at the end			540
Normal spoilage (2200*15%)			330
Abnormal spoilage			294
unit accounted for			3364
Abnormal spoilage = 3364-2200-540-330 =294
Computation of equivalent production unit
Particulars		unit	%	material	%	conversion
completed & transferred out		2200	100%	2200	100%	2200
normal spoilage		330	100%	330	100%	330
abnormal spoilage		294	100%	294	100%	294
WIP ending		540	100%	540	25%	135
equivalent unit of production		3364		3364		2959
Calculation of cost per equivalent unit of production
Particulars		Material	Conversion	Total
Cost to be accounted for
Cost at the beginng		117532	17087	134619
Cost during september		575452	228510	803962
total cost		692984	245597	938581
equivalent unit production		3364	2959	6323
unit cost per equivalent unit		206	83	289
Cost of production summary
Beginning cost				134619
cost incurred in sept				803962
total cost transferred				938581
Cost accounted for
transferred out
2)
cost transferred out		(2200+330)*289		731170
cost of WIP Ending
Material		540*206		111240
conversion		135*83		11205
				122445
abnormal spoilage
material		294*206		60564
conversion		294*83		24402
total				84966
Total cost accounted for				938581