Appendix: Normal and Abnormal Spoilage

Larkin Company produces leather strips for western belts using three processes: cutting, design and coloring, and punching. The weighted average method is used for all three departments. The following information pertains to the Design and Coloring Department for the month of June:

There was no beginning work in process.

There were 400,000 units transferred in from the Cutting Department.

Ending work in process, June 30: 50,000 strips, 80 percent complete with respect to conversion costs.

Units completed and transferred out: 330,000 strips. The following costs were added during the month:

Transferred in	$2,000,000
Direct materials	600,000
Conversion costs	780,000

Direct materials are added at the beginning of the process.

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

Required:

1. Calculate equivalent units of production for transferred-in materials, direct materials added, and conversion costs.

	Equivalent Units
Transferred In
Direct Materials
Conversion Costs

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

	Unit Cost
Transferred In	$
Direct Materials	$
Conversion Costs	$
Total unit cost	$

3. What is the total cost of units transferred out?

$_________________

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

$_____________