Question

In: Accounting

Monthly information is as follows:                   Beginning of month       End of month          

Monthly information is as follows:                   Beginning of month       End of month

          Work in process Inventory:                            1,000 units          4,000 units

          Conversion: degree of completion in WIP           60%                     40%

          Direct Material Costs in Beginning WIP       $ 8,100                          ?

          Conversion Costs in Beginning WIP              $11,300                       ?

During the month:      Costs incurred for Direct Materials                $27,975  

Costs incurred for Conversion                        $27,235

At month end:             2,860 good units were completed, 140 units were spoiled

Direct Materials:         90% are added at the beginning of the process, the rest at 90% conversion

Conversion costs:        Added evenly during the process.

Spoiled Units:             Detected at 100% conversion. Normal Spoilage = 2% of units started

Required:

  1. Using FIFO, calculate:
    1. Ending WIP
    2. Cost of Goods Manufactured
    3. Spoilage expense

Solutions

Expert Solution

Working Notes :-

1) Statement of Equivalent Production :-

Degree of Completion

Direct Material Conversion

Particulars Units Particulars Units % Units % Units
Opening WIP 1000 Transfer to next process:
From O/p WIP 1000 10% 100 40% 400
From Current Intro 1860 100% 1860 100% 1860
Normal Spoilage 120 0% 0 0% 0
Abnormal Spoilage 20 100% 20 100% 20
Closing WIP 4000 90% 3600 40% 1600
Material Introduced 6000
TOTAL 7000 TOTAL 7000 5580 3880

2) Statement of cost per equivalent production :-

Particulars Units Costs Cost/equivalent units
Direct Material 5580 $ 27,975.00 $ 5.01
Conversion 3880 $ 27,235.00 $ 7.02

MAIN SOLUTION :-

i) Cost of Ending WIP :-

Particulars Units Cost/equivalent units Units*cost
Direct Material 3600 $ 5.01 $ 18,048.39
Conversion 1600 $ 7.02 $ 11,230.93
TOTAL $ 29,279.31

ii) Cost of Goods Manufactured :-

Particulars Units Calculations Costs
Direct Material 1960 [$ 8100 + (100 x $ 5.01) + (1860 x $ 5.01)] $ 17,926.34
Conversion 2260 [$ 11300 + (400 x $ 7.02) + (1860 x $ 7.02)] $ 27,163.69
TOTAL $ 45,090.03

iii) Spoilage Expense :-

Particulars Units Cost/equivalent units Costs
Direct Material 20 $ 5.01 $ 100.27
Conversion 20 $ 7.02 $ 140.39
TOTAL $ 240.66

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