Universal Automotive Group is a maker of engines for high performance cars and u
ID: 2499963 • Letter: 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". Beginning work-in-process (40% completed) 350 units Transferred-in 1,400 units Normal spoilage 90 units Abnormal spoilage 90 units Good units transferred out 1,220 units Ending work-in-process (22% completed) 350 units Conversion costs in beginning inventory $159,500 Current conversion cost $660,455 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 total conversion costs transferred to finished goods? 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". Beginning work-in-process (40% completed) 350 units Transferred-in 1,400 units Normal spoilage 90 units Abnormal spoilage 90 units Good units transferred out 1,220 units Ending work-in-process (22% completed) 350 units Conversion costs in beginning inventory $159,500 Current conversion cost $660,455 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 total conversion costs transferred to finished goods?Explanation / Answer
Computation of the total conversion costs tranferred to finished goods using weighted-average method.We have,
Step1: Computation of total cost.We have,
Total costs = Conversion cost of beginning inventory +Current conversion cost
Total costs = $159,500 + $660,455 = $ 819,955
Step2: Computation of equivalent units.We have,
Equivalent units = Good units transferred out + Abnormal spoilage + Normal spoilage + Ending work-in- process
Equivalent units = 1,220 + 90 + 90 + (350 x 22%) = 1,477 units
Step3:Computation of cost per units.We have,
Cost per units = Total costs / Equivalent units = $ 819,955 / 1,477 = $ 555.15
Step4: Computation of total conversion costs tranferred to finished goods.We have,
Total conversion costs tranferred to finished goods = (1,220 x 555.15) + (90 x 555.15)
Total conversion costs tranferred to finished goods = 677,283 + 49,964 = $ 727,247
Hence,total conversion costs tranferred to finished goods is $ 727,247
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