APCO Company manufactures various lines of bicycles. Because of the high volume of each line, the company employs a process cost system using the weighted-average method to determine unit costs. Bicycle parts are manufactured in the molding department and then are consolidated into a single bike unit in the molding department and transferred to the assembly department where they are partially assembled. After assembly, the bicycle is sent to the packing department. Annual cost and production figures for the assembly department are presented in the schedules that follow. Defective bicycles are identified at the inspection point when the assembly labor process is 70 percent complete; all assembly materials have been added at this point. The normal rejection for defective bicycles is 5 percent of the bicycles reaching the inspection point. Any defective bicycles above the 5 percent quota are considered to be abnormal. All defective bikes are removed from the production process and destroyed.

Required

1. Compute the number of defective, or spoiled, bikes that are considered to be

a. Normal.

b. Abnormal.

2. Compute the equivalent units of production for the year for

a. Bicycles transferred in from the molding department.

b. Bicycles produced with regard to assembly material.

c. Bicycles produced with regard to assembly conversion.

3. Compute the cost per equivalent unit for the fully assembled bike.

4. Compute the amount of the total production cost of $1,672,020 that will be associated with the following items:

a. Normal spoiled units.

b. Abnormal spoiled units.

c. Good units completed in the assembly department.

d. Ending work-in-process inventory in the assembly department.

5. Describe how to present the applicable dollar amounts for the following items in the financial statements:

a. Normal spoiled units.

b. Abnormal spoiled units.

c. Completed units transferred in to the packing department.

Transcribed Image Text:

c. The cost of the good units completed and transferredto the Packing Department ($1,487,167) would be included in the Packing Department's production costs. The unit cost would absorb the normal spoilage as $1,487,167/40,000 units $37.179 per unit. Thus, the cost of normal spoilage would be a portion of the Packing Department's inventory accounts andor cost of goods soldaccount depending upon the proportion of the units in the work-in-process inventory, inishedgoods inventory,and units sold during the year