Universal Automotive Group is a maker of engines for high performance cars and u

Question

Universal Automotive Group is a maker of engines for high performance cars and uses a process costing system. The following information pertains to the final department of manufacturing for Universal's most popular engine, the "Atomic 8".

Current conversion cost

$692,954

  

Universal Automotive Group 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 the Atomic 8 that are spoiled are the result of defects not discovered before inspection of finished units. Using the weighted-average method, answer the following question:

What are the equivalent units for conversion costs?  

What are the total conversion costs of abnormal spoilage?  

Beginning work-in-process (40% completed) 370 units Transferred-in 1,560 units Normal spoilage 100 units Abnormal spoilage 90 units Good units transferred out 1,350 units Ending work-in-process (24% completed) 390 units Conversion costs in beginning inventory $174,300

Current conversion cost

$692,954

  

Explanation / Answer

Whole Unit Equivalent Units Good Units Transferred Out 1350 1350 Ending WIP 24% 390 93.6 Normal Loss 100 100 Abnormal Loss 90 90 Total Equivalent Units 1633.6 Total Cost 174300+692954 867254 Cost per Eq Unit 867254/1633.6                     530.89 No of Units of Abnormal Loss 90 Cost of Abnormal Loss 530.89*90                     47,780

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