Best Foods manufactures cereal in a continuous, mass production process. Cereal mix is added at the beginning of the process. Normal losses are minimal and abnormal losses infrequently occur when foreign materials are found in the cereal mix. Routine inspection occurs at the 95 percent completion point as to conversion.

During September, a machine malfunctioned and contaminated 5,000 pounds of cereal mix This abnormal loss occurred when conversion was 75 percent complete on those pounds of product. The error was immediately noticed, and those pounds of cereal mix were pulled from the production process. Two thousand additional pounds of cereal mix were detected as unsuitable at the routine inspection point; this amount was considered within normal limits. Production data for the month follow.

a. Determine the number of equivalent units of production for direct material and for conversion, assuming a FIFO cost flow.

b. If the costs per equivalent unit of production are \(\$ 1.10\) and \(\$ 0.50\) for direct material and conversion, respectively, what is the cost of the ending WIP Inventory?

c. What is the cost of abnormal loss? How is this cost treated in September?

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Beg. WIP Inventory (65% complete) Started during the month..... Ending WIP Inventory (40% complete). 125,000 pounds 675,000 pounds 80,000 pounds