Question

Ramsha Industries Makes Rocking Chairs. The Chairs Are Assembled In The Assembly Department ... Question: Ramsha Industries makes rocking chairs. The chairs are assembled in the Assembly Department and s... Ramsha Industries makes rocking chairs. The chairs are assembled in the Assembly Department and stained and sealed in the Finishing Department. Chairs are tested for quality in the Assembly Department before being transferred to Finishing. Normal spoilage (defective chairs) averages 1% of good units in the Assembly Department. Ramsha uses the FIFO cost method of process costing. Activity during February in the Assembly Department: Production activity:

   Material Conversion

Work in process, beginning inventory 1,000    90%    50%

Started in February 6,000

Good units transferred out 6,000

Work in process, ending inventory 900 95% 75%

Cost activity: total    material    conversion

Total Material Conversion Costs in beginning WIP 83,830    $ 65,080 $ 18,750 $

February costs    525,570 387,520 138,050

What is the total cost of the units transferred out? What is the cost of ending inventory?

How much should be charged to Loss from Abnormal Spoilage?

What is the unit cost of the goods transferred out in February?

Answer 1

FIFO method
Beggining units	1000	Transferred out	6,000
Started intro production	6000	Normal spoilage	60
		Abnormal spoilage	40
		Ending units	900
	7000		7,000
Equivalent units	Material	Conversion
Beginning units	1000	1000
Completion in current period	10%	50%
A	100	500
Units started and completed	5,000	5,000
Completion	100%	100%
B	5000	5000
Abnormal spoilage	40	40
Completion	100%	100%
C	40	40
Ending Units	900	900
Completion	95%	75%
D	855	675
Total units A+B+C	5995	6215
Per unit cost	Cost	Total units	Per unit cost
Material cost	387520	5995	64.64
Conversion cost	138050	6215	22.21
	525570		86.85

Cost of goods sold	Material	convertion cost
Beginning inventory completed
Completion	10%	50%
Per unit cost	64.64	22.21
Units	1000	1000
Total cost   A	6464	11106	17570
Abnormal spoilage
Completion	100%	100%
Per unit cost	64.64	22.21
Units	40	40
Total cost    B	2586	888	3474
Units started and completed
Completion	100%	100%
Per unit cost	64.64	22.21
Units	5,000	5000
Total cost   C	323203	111062	434265
Beginning WIP	65080	18750	83830
Total A+B+C			539139
Ending work in progress
Completion	95%	75%
Per unit cost	64.64	22.21
Units	900	900
Total cost	55268	14993	70261