Question

Pls do not handwrite the answer, this is for easy reading

Speedy Scoot manufacturers various lies of e-scooters due to its rising popularity. Speedy scoot offers 3 models of e-scooters: Windy, Fast and Quiet. Because of the high volume of each line, the company employs a process costing system using the FIFO method to determine unit costs.

A typical e-scooter consists of 4 components: electrical & electric system, the motion system, the structure and powertrain. The structure and the motion system are manufactured in the Moulding department. They are then consolidated into a single e-scooter unit in the moulding department and transferred to the assembly department where they are assembling is completed. In the assembly department, the appropriate electrical & electric system and powertrain are added to complete each model of e-scooter. Each of the 3 models of e-scooter is produced in a joint process up to the split-off point which is the Assembly process. After being assembled, the different models of e-scooters are sent to the packing department.

Annual cost and production figures for the Assembly department are as follows:-

                                                      Assembly Department Cost Data

	Transferred In from moulding Department	Assembly Materials	Assembly Conversion Cost	Total Cost of e-scooter through Assembly
Beginning WIP costs	$82,200	$6,660	$11,930	$100,790
Current period costs	$1,237,800	$96,840	$236,590	$1,571,230
Total costs	$1,320000	$103,500	$248,520	$1,672,020

Assembly Department Production Data

                                                                                                                                Percentage of completion

		No of units	Assembly Materials	Assembly conversion
Beginning Work in Progress		300	100%	80%
Transferred In from Moulding Department		4,500	-	-
Transferred Out to packing Department		4,000	100%	100%
End Work in Progress		400	50%	20%

Defective e-scooter are identified at the inspection point when the assembly conversion process is 70% complete. 50% of assembly materials are added at the beginning of the process and the remainder of the assembly materials are added at the 60% mark of the assembly conversion process. Hence, all assembly materials are added by the time the e-scooter is inspected. The normal rejections for defective e-scooter are 5% of the e-scooter reaching the inspection point. Any defective e-scooters above 5% quota are to be treated as abnormal. All defective e-scooter are destroyed after removed from the production process.

The production mix of the different models at the split-off point is determined to be 50%, 30% and 20% for Windy, Fast and Quiet respectively. In the Packing Department, separate packing costs are incurred on each line of e-scooter. Due to the complexity of the parts for Windy, the packing cost is at $20 per unit as compared to only $10 per unit for the other 2 models. The current selling prices of Windy, Fast and quiet are at $700, $500 and $150 respectively.

The production workers in the Moulding department are rewarded with a fixed bonus if production volume can be efficient. This is measured based on achieving a fixed volume of production within the specified period.

Required:

a) Compute the normal and abnormal spoilage for Speedy Scoot.

b)Prepare a production cost report for speedy scoot that shows the following:

bi) Equivalent units computed for production with regards to each cost category
bii) Costs of normal spoilage and abnormal spoilage
biii) Costs of units transferred out to Packing Department
bv) Costs of end WIP

Answer 1

Assembly Department

Process cost sheet under FIFO method

Statement of Equivalent units of production

Inputs		Output		Equivalent	Production
Item	Units	Item	Units	Material	%	Conversion	%
Op.WIP	300	Work on op.WIP	300	-	0%	60	20%
Tr. from Moulding Dept	4500	Introduced and Completed	3700	3700	100%	3700	100%
		Normal loss(4400*5%)	220	-	-	-	-
		Abnormal loss (400-220)	180	180	100%	180	100%
		Closing WIP	400	200	50%	80	20%
	4800		4800	4080		4020

Statement of cost for each element

Element of cost	Cost	Equivalent prodution	Cost per unit
Op.WIP	82200
Tr. from Moulding Department	1237800
Less: Scrap value from normal loss	-
	1320000	4080	323.5
Assembly material (6660+96840)	103500	4080	25.5
Assembly conversion(11930+236590)	248520	4020	62
Total	1672020		411

Process Cost Sheet

Particulars	Amount
Opening WIP
Assembly Conversion(60*62)	3720
Introduced and completed(3700*411)	1520700
Closing WIP
Tr. Material(200*323.50)	64700
Assembly material(200*25.50)	5100
Assembly Conversion(80*62)	4960
	74760
Abnormal loss(180*411)	73980

bii)Costs of normal spoilage will be NIL

Cost of Abnormal spilage is 73980

biii)Cost of units transferres out of packing department

Particulars	Amount
Costs till Assembly Department	1524420
Packing Costs
Windy(4000*50%*20)	40000
Fast(4000*30%*10)	12000
Quiet(4000*20%*10)	8000
Total Cost	1584420

bv) Cost of closing WIP is 74760