Question

Universal Automotive Group is a maker of engines for high performance cars and uses a process costing system. The following information pertains to the final department of manufacturing for Universal's most popular engine, the "Atomic 8".

Beginning work-in-process (40% completed)   400 units
Transferred-in   1,600 units
Normal spoilage   100 units
Abnormal spoilage   100 units
Good units transferred out   1,400 units
Ending work-in-process (25% completed)   400 units
Conversion costs in beginning inventory   $180,500
Current conversion costs   $728,218

Universal Automotive Group calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of the Atomic 8 that are spoiled are the result of defects not discovered before inspection of finished units. Using the weighted-average method, answer the following question:

What are the total conversion costs of abnormal spoilage?
      
$60,518.
      
$53,454.
      
$64,908.
      
$58,314.

Answer 1

Answer-

To calcualte conversion cost of abnormal spoilage first, need to calculate equivalent unit of production and cost per equivalent unit which will help to calculate the cost of abnormal spoilage.

Equivalent units		Cost of Production Report
Flow of production		Physical units	Direct Material	Conversion Cost
WIP-Beginning units	Given	400
Started during current period	Given	1,600
Unit to account for		2,000
Units completed & transferred out (100% completed)	Given	1,400	1,400	1,400
Units, ending WIP	Given	400
(400*0.25)(400*0.25)			100	100
Normal Loss		100	100	100
Abnormal Loss		100	100	100
Accounted for
Equivalent units of output		2,000	1,700	1,700

Cost per equivalent unit		Direct Material	Conversion Cost	Total cost
WIP_Begining	Given		180,500	180,500
Add-Cost added during the period	Given		728,218	728,218
Total costs to account for		-	908,718	908,718
Cost incurred to date		-	908,718
Divided by -Equivalent units	As calculated above	1,700	1,700
Cost per equivalent unit		-	534.54

Total Conversion cost of abnormal spoilage	Abnormal units*cost per unit
	100*534.54
	$                                  53,454.00