172 Chapter 6
Labor
Overhead
2,000
250,000
252,000
7,800
Conversion:
Current actual cost
$ 2,136,000
Standard cost (167,000 × $12.50)
(2,087,500)
Conversion cost variance
$ 48,500 U
Chapter 6 173
accessible website, in whole or in part.
b. Normal shrinkage = 250,000 × 0.01 = 2,500 pounds
c. Abnormal shrinkage = 7,800 – 2,500 = 5,300 pounds
The cost of abnormal shrinkage is treated as a loss of the period.
d.
Total
Material
Conversion
Beginning WIP Inventory
2,000
Started
250,000
Units to account for
252,000
Beginning WIP Inventory
2,000
2,000
2,000
Started & completed
236,200
236,200
236,200
Ending WIP Inventory
6,000
6,000
1,800
Normal loss
2,500
Abnormal loss
5,300
5,300
5,300
EUP (WA)
252,000
249,500
245,300
e.
Total
Material
Conversion
Beginning WIP costs
$ 1,957
$ 1,807
$ 150
Current costs
264,588
240,208
24,380
Total costs
$266,545
$242,015
$ 24,530
Divide by EUP
÷ 249,500
÷ 245,300
Cost per EUP
$1.07
$0.97
$0.10
Transferred out (238,200 $1.07)
$254,874
Ending inventory:
Material (6,000 $0.97)
$5,820
Conversion (1,800 $0.10)
180
6,000
Abnormal spoilage (5,300 $1.07)
5,671
Total cost accounted for
$266,545
g. The approximate cost of April turkey was $1.13 per pound ($1,807 BI cost of
turkey ÷ 1,600 EUP pounds in BI), while the average cost per pound in May
was approximately $0.97 per pound. It is highly likely that buying the lower-
174 Chapter 6
66. a. Gary’s Tools Grinding Department
Cost of Production Report
For the Month Ended August 31, 2013
Units
Beginning WIP
Inventory
1,000
Transferred in
50,800
Units to account
for
51,800
Units
Trans. In
DM
DL
OH
Beg. WIP
Inventory
1,000
1,000
1,000
1,000
1,000
Started &
completed
48,000
48,000
48,000
48,000
48,000
Ending WIP
Inventory
1,800
1,800
0
720
1,170
Normal spoilage
650
650
0
650
650
Abnormal spoilage
350
350
0
350
350
EUP (WA)
51,800
51,800
49,000
50,720
51,170
Total
Trans. In
DM
DL
OH
Beg. WIP
Inventory
$ 7,355
$ 6,050
$ 0
$ 325
$ 980
Current costs
235,557
149,350
12,250
23,767
50,190
Total costs
$242,912
$155,400
$12,250
$24,092
$51,170
Divided by EUP
÷ 51,800
÷ 49,000
÷ 50,720
÷ 51,170
Cost per EUP
$4.725
$3.00
$0.25
$0.475
$1.00
Cost Assignment:
Transferred out:
Good units (49,000 × $4.725)
$231,525
Normal spoilage (650 × $4.475)
2,909
$234,434
Ending inventory:
Transferred in (1,800 × $3.00)
$ 5,400
Labor (720 × $0.475)
342
Overhead (1,170 × $1.00)
1,170
6,912
Abnormal spoilage (350 × $4.475)
1,566
Total costs accounted for
$242,912
b. Loss on Abnormal Spoilage 1,566
Work in Process Inventory—Grinding 1,566
67. a. Beginning inventory
3,000
Transferred in
45,000
Units to account for
48,000
Transferred out
40,000
Ending inventory
4,000
Bikes lost
4,000
Units accounted for
48,000
Chapter 6 175
accessible website, in whole or in part.
(1)
Bikes passing through Assembly
48,000
Minus bikes in EI (have not reached the
inspection point, so there is no way
to determine acceptability)
(4,000)
Bikes reaching the inspection point
44,000
Normal defective rate
× 0.05
Normal number of defective bikes
2,200
(2)
Total bikes lost
4,000
Normal number of defective bikes
(2,200)
Abnormal number of defective bikes
1,800
b.
Units
Trans. In
Material
Conversion
Transferred out
40,000
40,000
40,000
40,000
Ending WIP
Inventory
4,000
4,000
2,000
800
Normal loss
2,200
2,200
2,200
2,200
Abnormal loss
1,800
1,800
1,800
1,800
EUP (WA)
48,000
48,000
46,000
44,800
c.
Total
Trans. In
Material
Conversion
Beginning WIP
$ 102,790
$ 82,200
$ 6,660
$ 13,930
Current costs
1,576,070
1,237,800
96,840
241,430
Total cost
$1,678,860
$1,320,000
$103,500
$255,360
Divided by EUP
÷ 48,000
÷ 46,000
÷ 44,800
Cost per EUP
$35.45
$27.50
$2.25
$5.70
d. (1) Normal defective bikes: 2,200 × $35.45 = $77,990
(4)
Ending WIP Inventory
Transferred in (4,000 × $27.50)
$110,000
Material (2,000 × $2.25)
4,500
Conversion (800 × $5.70)
4,560
Total
$119,060
f. Normal spoilage cost is an expected cost of producing good units. As such, it is
not an extra cost but thought to be inherent in producing good units. Normal
spoilage may occur because of material or labor quality, machine malfunctions,
(CMA adapted)
176 Chapter 6
68. Maximum normal spoilage = 70,000 × 0.03 = 2,100 units
LaToya Company
Cost of Production Report
For the Month Ended May 31, 2013
Units
Material
Conversion
Beginning WIP Inventory
5,600
Units started
74,400
Units to account for
80,000
Beginning WIP Inventory
5,600
5,600
5,600
Started & completed
64,400
64,400
64,400
Ending WIP Inventory
7,500
7,500
2,500
Normal spoilage
2,100
2,100
2,100
Abnormal spoilage
400
400
400
Units accounted for
80,000
80,000
75,000
Total
Material
Conversion
Beginning WIP Inventory
$ 7,632
$ 6,400
$ 1,232
Current costs
106,168
74,400
31,768
Cost to account for
$113,800
$80,800
$33,000
Divided by EUP
÷ 80,000
÷ 75,000
Cost per EUP
$1.45
$1.01
$0.44
Cost Assignment:
Units completed (70,000 × $1.45)
$101,500
Normal spoilage:*
Direct material (2,100 × $1.01)
$2,121
Conversion (2,100 × $0.44)
924
3,045
$104,545
Ending inventory:
Direct material (7,500 × $1.01)
$ 7,575
Conversion (2,500 × $0.44)
1,100
8,675
Abnormal spoilage:*
Direct material (400 × $1.01)
$ 404
Conversion (400 × $0.44)
176
580
Total cost accounted for
$113,800
Chapter 6 177
69. Maximum normal spoilage = 70,000 × 0.03 = 2,100 units
LaToya Company
Cost of Production Report
For the Month Ended May 31, 2013
Units
Material
Conversion
Beginning WIP Inventory
5,600
Units started
74,400
Units to account for
80,000
Beginning WIP Inventory
5,600
0
2,800
Started & completed
64,400
64,400
64,400
Ending WIP Inventory
7,500
7,500
2,500
Normal spoilage
2,100
2,100
630
Abnormal spoilage
400
400
120
Units accounted for
80,000
74,400
70,450
Total
Material
Conversion
Beginning WIP Inventory
$ 7,632
Current costs
106,168
$74,400
$31,768
Total cost to account for
$113,800
Divided by EUP
÷ 74,400
÷ 70,450
Cost per EUP
$1.45
$1.00
$0.45*
*Rounded
Cost Assignment:
Transferred out:
Beginning WIP Inventory cost
$ 7,632.00
Cost to complete
Conversion (2,800 × $0.45)
1,260.00
Total cost of BI
$ 8,892.00
Started & completed (64,400 × $1.45)
93,380.00
Normal spoilage:*
Direct material (2,100 × $1.00)
$2,100.00
Conversion (630 × $0.45)
283.50
2,383.50
Total cost transferred out
$104,655.50
Ending WIP Inventory:
Direct material (7,500 × $1.00)
$7,500.00
Conversion (2,500 × $0.45)
1,125.00
8,625.00
Abnormal spoilage:
Direct material (400 × $1.00)
$ 400.00
Conversion (120 × $0.45)
54.00
454.00
Total cost accounted for (off due to rounding)
$113,734.50