Question

McKay Materials are added at the beginning of the process in McKay Company's blending department, the first stage of the production cycle. The inspection point is at the end of the process. The following information is available for the month of July:

Units Work in process, July 1 (35% complete as to conversion costs) 50,000

Started in July 200,000

Completed and transferred to the next department 195,000

Work in process, July 31 (40% complete as to conversion costs) 45,000

Costs in beginning work in process Direct materials $125,600

Conversion $104,300

Costs added in July Direct materials $349,400

Conversion $397,500

a) McKay estimates that normal spoilage is 2% of the good units completed. Using the weighted average cost method, what is the cost of the units transferred out of the blending department? (ROUND ALL COST PER EQUIVALENT UNIT CALCULATIONS TO THE NEAREST PENNY)

$825,435

$850,750

$846,500

$834,565

$809,250

None of the answers listed are correct

b)

McKay estimates that normal spoilage is 2% of the good units completed. Using the weighted average cost method, what amount will be identified as abnormal spoilage? (ROUND ALL COST PER EQUIVALENT UNIT CALCULATIONS TO THE NEAREST PENNY)

$17,226

$24,900

$25,315

None of the answers listed are correct

$16,185

$11,014

Answer 1

			Physical	Material	Conversion
UNITS			Units	Equiv. Units	Equiv. Units
Units to account for:
Beginning work in process	50000
Started in production	200000
Total Units to account for	250000
Units Accounted for:
Completed and transferred	195000	195000	195000
Normal Spoilage		3900	3900	3900
Abnormal Spoilage		6100	6100	6100
Ending work in process	45000	45000	18000
Total Units to be accounted for	250000	250000	223000
				Material	Conversion	Total
COSTS				Cost	Cost	Cost
Costs to account for:
Beginning work in process		1,25,600	104300	2,29,900
cost added during the period		3,49,400	3,97,500	7,46,900
Total cost to account for		4,75,000	5,01,800	9,76,800
Divided by: Total EUP		250000	223000
Cost per equivalent unit		1.9	2.25	4.15
Cost Accounted for:
Good Units completed:
Cost before Normal Spoilage (195000 units @4.15)		809250
Normal Spoilage (3900 units @$4.15)			16185
Total cost of Good unit				825435
Abnormal Spilage (6100 units @$4.15)				25315
Q1.
Answer is $ 825435
Q2
Answer is $ 25315