In: Accounting
Atlantic Manufacturing Company uses process costing. All materials are added at the beginning of the process. The normal spoilage rate is calculated as 10% of good units completed.
The cost of the beginning work-in-process in the month of May is $3,000,000, including $1,600,000 of input of materials, 100,000 units, and $1,400,000 for conversion costs. The beginning work-in-process is 70% complete.
During May, the input includes $7,400,000 for materials, 800,000 units started and $4,190,000 for conversion costs. There were 700,000 good units finished. In addition, the ending work-in-process in May is 100,000 units with 60% complete. All spoilage occurred when all processing was complete, at the final inspection.
Required:
(a) The dollar value of abnormal spoilage.
(b) The cost of the good units finished.
(c) The cost of ending work-in-process inventory