Strongarm manufactures various lines of bicycles. Because of the high volume of each type of product, 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 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 follow:

PRODUCTION DATA

Beginning WIP Inventory (100% complete as to transferred in;

100% complete as to material; 80% complete as to conversion) .. 3,000 units

Transferred in during the year (100% complete as to transferred in) ... 45,000 units

Transferred to Packing .................... 40,000 units

Ending WIP Inventory (100% complete as to transferred in;

50% complete as to material; 20% complete as to conversion) .. 4,000 units

Damaged bicycles are identified on inspection when the assembly process is complete. The normal rejection rate for damaged bicycles is 5 percent of those reaching the inspection point. Any damaged bicycles above the 5 percent quota are considered to be abnormal. Damaged bikes are removed from the production process, and, when possible, parts are reused on other bikes. However, such salvage is ignored for the purposes of this problem.
Strongarm does not want to assign normal spoilage cost either to the units in ending inventory (because they have not yet been inspected) or to the bikes that are considered "abnormal spoilage." Thus, the company includes both normal and abnormal spoilage in the equivalent units schedule (at the appropriate percentage of completion). The cost of the normal spoilage is then added to the bikes transferred to the Packing Department. Abnormal spoilage is treated as a period loss.
a. Compute the number of damaged bikes that are considered to be
1. Normal spoilage.
2. Abnormal spoilage.
b. Compute the weighted average equivalent units of production for the year for
1. Bicycles transferred in from the Molding Department.
2. Bicycles produced with regard to Assembly material.
3. Bicycles produced with regard to Assembly conversion.
c. Compute the cost per equivalent unit for the fully assembled bicycle.
d. Compute the amount of total production cost that will be associated with the following items:
1. Normal damaged units.
2. Abnormal damaged units.
3. Good units completed in the Assembly Department.
4. Ending Work in Process Inventory in the Assembly Department.
e. What amount will be transferred to the Packing Department?
f. Discuss some potential reasons for spoilage to occur in this company. Which of these reasons would you consider important enough to correct and why? How might you attempt to correct theseproblems?

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COST DATA Transferred In Direct Material Conversion :@ul Beginning WIP Inventory Current period 82,200 1,237,800 $1,320,000 6,660 96,840 $103,500 13,930 241,430 $255,360 Totals