Appendix: Normal and Abnormal Spoilage

a$.$ There was no beginning work in process.

b$.$ There were $560,000$ units transferred in from the Cutting Department.

c$.$ Ending work in process, June $30$: $70,000$ strips, $80$ percent complete with respect to conversion costs.

d$.$ Units completed and transferred out: $462,000$ strips. The following costs were added during the month:

Transferred in

$$2,800,000$

Direct materials

$840,000$

Conversion costs $,1,092,000$

e$.$ Direct materisls are added at the beginning of the process.

f$.$ Inspection takes place at the end of the process. All spoilage is considered normal.

Required:

Caleulate equivalent units of production for transferred$-$in materisls, direct materisls added, and conversion costs.

Equivalent Units

Transferred In

Direct Materials

Conversion Costs

Calculate unit costs for the three categories of Requirement $1.$ Round your answers to the nearest cent.

Unit Cost

What is the total cost of units transferred out?

What is the cost of ending work$-$in$-$process inventory?

$

Assume that all spoilsge is considered abnormal. How should abnormal spoilsge be trested? Give the journal entry to account for the cost of the spoiled units.

Some compsnies view all spoilsge as abnormsl. Explain why.

The abnormal spoilage, the cost of $23,380$ units would be assigned to the $,,$ and the cost of the other $4,620$ units would be assigned to the

The journal entry for abnormal spoilsge deseribes what the loss is

Explaining why companies view all spoilsge as abnormal is

Using the $1$ percent rule allows the firm to prediet normal spoilage i:

Total quality management would say that all spoilsge should be treated as abnormal and assigned to a loss account.

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