Question

ABC Concept manufactures small tables in its Processing Department. Direct materials are added at the initiation of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some units are spoiled due to undetectable materials defects. Spoiled units generally constitute 3% of the good units. Data for December 2017 are as follows:

WIP, beginning inventory 12/1/2017 23,000 unitsDirect materials (100% complete)conversion costs (45% complete)Started in December 76,500 unitsCompleted and transferred out 12/31/2017 72,100 unitsWIP, ending inventory 12/31/2017 19,000 unitsDirect materials (100% complete)Conversion costs (40% complete)Costs for December:WIP, beginning inventory:Direct materials $153,000Conversion costs 77,100Direct materials added 223,400Conversion costs added 294,000Abnormal spoilage totals ________.

Answer 1

6,237

Explanation:

For computation of Abnormal spoilage totals first we need to find out the total spoiled units and normal spoiled units is shown below:-

Total spoiled units = Units in beginning Work in progress + Unit started - Units completed and transferred out - Units in ending Work in progress

= 23,000 + 76,500 - 72,100 - 19,000

= 99,500 - 72,100 - 19,000

= 8,400

and

Normal Spoiled units = Units completed and transferred out × Spoiled units percentage

= 72,100 × 3%

= 2,163

Abnormal Spoilage totals = Total spoiled units - Normal Spoiled units

= 8,400 - 2,163

= 6,237

Therefore for computing the abnormal spoilage totals we simply applied the above formula.