Question

The Scooter Company uses a process cost system for making scooter wheels. Materials are added at the beginning of the process and conversion costs are uniformly incurred. At the beginning of October the work-in-process is 40 percent complete and at the end of the month it is 60 percent complete. Spoilage is detected at the end of the process. Other data for the month include:

Beginning work-in-process inventory				1600	units
Units started				20000	units
Units placed in finished goods				12000	units
Ending work-in-process inventory				1200	units
Normal spoilage % on all units finished				20	percent
Conversion costs				40320
Cost of direct materials				40000
Beginning work-in-process costs:
Materials				4000
Conversion				4032

Required

a. Prepare a production cost worksheet assuming that spoilage is recognized and the weighted-average method is used.

b.Prepare journal entries to record transferring out of cost from the work-in-process accounts.

please explain calulations.

Answer 1

SOLUTION:

(A)&(B)

Production Worksheet		Direct Material		Conversion Cost
	% of		% of
Flow of Production	Whole Units	Completion	units	Completion	units
Beginning Work in process inventory	1500
Units Started	20,000
Total Units to be accounted for	21,500
Good units completed and transferred
during the current period	12,000	100	12,000	100	12000
Normal Spoilage	2,400	100	2,400	100	2,400
Abnormal Spoilage	6,000	100	6000	100	6,000
Ending Work in process inventory	1,200	100	1,200	50	720
Total Unit Accounted for	21,600
Equivalent units			21,600		21,120
WORKING NOTES
Calculation of Spoliage
Beginning Work in process inventory				1,600
Units Started				20,000
Total Units accounted for				21,600
Less: Finished goods				-12,000
Less: Ending work in process inventory				-1,200
Toal Spoilage				8,400
Normal Spoilage 20% of finished goods i.e					2400
Abormal Spoilage (Total Spoilage - Normal Spoilage)					6000
Total Spoilage					8400

Production cost worksheet	Total	Direct materials	Conversion costs
Beginning work in process	8,032	4,000	4032
Cost added in current period	80,320	40,000	40,320
A.Total Cost Incurred	88,352	44,000	44,352
B. Equivalent Units		21,600	21,120
C. Cost per equivalent Units (A/B)		2037	2100
Assignment of Cost
Goods Unit completed and transferred out
Direct material (12,000*2.037)		24,444
Conversion Cost (12,001*2.100)			25200
cost Before normal spoilage	49,644	24,444	25,200
Normal Spoilage:
Direct material (2,400*2.037)		4889
Conversion Cost (2,400*2.100j:			5040
Cost of Normal Spoilage	9,929	4,889	5,040
A .Total Cost of good units completed and
transferred out	59573	29,333	30,240

Abnormal spoilage:
Direct material (6,000*2.037)		12,222
Conversion Cost (6,000*2.100)			12.6
B. Cost of Abnormal Spoilage	24,822	12,222	12,600
Ending Work in process:
Direct material (1,200*2.037)		2,444
Conversion Cost (720*2.100)			1,512
C. Cost of Ending work in process	3,956	2,444	1,512
Total cost (A+B+C)	3956	44,000	44352
Journal Entry for transfer of goods
General Journal	Debit	Credit
Finished Goods	59,573
Work in process		59,573

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