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In: Accounting

In manufacturing its products for the month of September 2007, Gamma Company incurred normal spoilage of...

In manufacturing its products for the month of September 2007, Gamma Company incurred normal spoilage of $7,000 and abnormal spoilage of $3,000. How much spoilage cost should Gamma charge as inventoriable for the month of September 2000?

How much spoilage cost should Gamma charge as inventoriable for the month of September 2000?

Gamma Company had the following production for the month of June: Units Work in process, June 1 6,000 Started during June 24,000 Completed and transferred to finished goods 18,000 Abnormal spoilage incurred 3,000 Work in process, June 30 9,000 Materials are added at the beginning of the process. As to conversion cost, work in process was 20% complete at the beginning and 70% complete at the end of the month. Spoilage is detected at the end of the process.

a. Using the weighted-average method, the equivalent units for June, with respect to conversion cost, were

b.Assume the manufacturing cost of the spoiled goods is $6,000. The journal entry to record the spoilage is

c. Using the first-in, first out (FIFO) method, the equivalent units for June, with respect to conversion cost, were

Solutions

Expert Solution

How much spoilage cost should Gamma charge as inventoriable for the month of September 2000?

$7000 would be charged as inventoriable for the month of September 2000.Normal spoilage is charged as inventoriable .Abnormal spoilage would be charged to profits.

Requirement a

Units completed + Abnormal Spoilage + Work in process ( 9000 x 0.70 ) = Equivalent Units

Equivalent Units = 18000 + 3000 + 6300 = 27300

Requirement b

Debit:Loss from abnormal spoilage         6000

Credit :Work in Process                           6000

Requirement c

Work in Process ( 6000 x 0.80 ) + Started and completed (18000 - 6000 ) + Abnormal Spoilage + Work in process ( 9000 x 0.70 ) = Equivalent Units

Equivalent Units = 4800 + 12000 + 3000 + 6300 = 26100        

ekkarill92 answered 2 years ago
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