Question

Giddings Pharmaceutical Company is a maker of drugs for high blood pressure and uses a process costing system. The following information pertains to the final department of Giddings's blockbuster drug called Solcax.

Beginning work-in-process (40% completed)							760
Transferred-in							3,790
Normal spoilage							380
Abnormal spoilage							200
Good units transferred out							3,400
Ending work-in-process (31% completed)							570
Conversion costs in beginning inventory							$2,440
Current conversion cost							$6,490

Giddings calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of Solcax that are spoiled are the result of defects not discovered before inspection of finished units. Materials are added at the beginning of the process. Using the weighted-average method, answer the following question:

What are the total conversion costs of abnormal spoilage?  

A.$430

B.$337

C.$816

D.$640

Answer 1

Answer A. $430
Particulars		Equivalent Units
	Physical Units	Materials	Conversion Costs
Units to be accounted for
Work in process - Beginning	760
Started into production	3,790
Total units	4,550
Units accounted for
Transferred out	3,400	3,400	3,400
Normal Spoilage	380	380	380
Abnormal Spoilage	200	200	200
Work in process, Ending	570	570	177
(100% materials, 31% conversion costs)
Equivalent units accounted for	4,550	4,550	4,157
Costs
Unit costs		Conversion
WIP, Beginning		2,440
Costs incurred during the period		6,490
Total Costs		8,930
Equivalent units		4,157
Costs per Equivalent Units		2.15
Cost Assignment		Conversion
Good Units completed & Transferred out (3400 Units)
Cost before adding Normal Spoilage		7,304
Normal Spoilage 80 Units		816
Total Cost of goods completed & Transferred out		8,121
Abnormal Spoilage - 200 Units		430
Work in Process - ending Inventory		380
Total Cost accounted for		8,930