Beta Company manufactures surgical instruments to the exacting specifications of
ID: 2593784 • Letter: B
Question
Beta Company manufactures surgical instruments to the exacting specifications of various customers. During April 2006, Job 201 for the production of 4,500 instruments was completed at the following costs per unit: Direct materials Direct manufacturing labour Allocated manufacturing overhead $ 60 20 80 $160 Final inspection of Job 201 disclosed 100 defective units and 50 spoiled units. The defective instruments were reworked at a total cost of $12,000, and the spoiled instruments were sold to a jobber for $3,000 8. [CPA Adapted] What would be the unit cost of the good units produced on Job 201? $168 b. $164 $162 d. $160 9. If the costs associated with spoilage and reworked units are considered as normal to manufacturing operations, the unit cost of the good units produced on Job 201 is $160. b. $162. $164. d. $165.Explanation / Answer
8. Unit cost of the good units produced on Job 201 will remain the same i.e.d. $160 as the total cost and good units produced will vary in the same proportion.
Total Cost of 4,350 units (4,500 - 100 - 50) = 4,350 * 160 = $696,000
Good unis produced = 4,500 - 250 = 4,350 units
So, unit cost of good units produced = 696,000 / 4,350 = $160 per unit
9. If the costs associated with spoilage and reworked units are considered as normal to manufacturing operations, the unit cost of the cost of the good units produced on Job 201 is again the same i.e. a. $160
Total cost in such case will be for entire 4,500 units = 4,500 * 160 = $720,000
Total good units = 4,500
So unit cost = 720,000 / 4,400 = $160 per unit
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