Appendix: Normal and Abnormal Spoilage Larkin Company produces leather strips fo

Question

Appendix: Normal and Abnormal Spoilage

Larkin Company produces leather strips for western belts using three processes: cutting, design and coloring, and punching. The weighted average method is used for all three departments. The following information pertains to the Design and Coloring Department for the month of June:

There was no beginning work in process.

There were 400,000 units transferred in from the Cutting Department.

Ending work in process, June 30: 50,000 strips, 80 percent complete with respect to conversion costs.

Units completed and transferred out: 330,000 strips. The following costs were added during the month:

Direct materials are added at the beginning of the process.

Inspection takes place at the end of the process. All spoilage is considered normal.

Required:

1. Calculate equivalent units of production for transferred-in materials, direct materials added, and conversion costs.

2. Calculate unit costs for the three categories of Requirement 1. Round your answers to the nearest cent.

3. What is the total cost of units transferred out?

$_________________

What is the cost of ending work-in-process inventory?

$_____________

Transferred in $2,000,000 Direct materials 600,000 Conversion costs 780,000

Explanation / Answer

1.

2.

3.

Closing WIP       330,000 Goods Completed and Transferred          50,000 Normal Spoilage          20,000 Accounted for       400,000 Less: Opeining WIP                   -   Started in current month       400,000 Accounted for       400,000

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