MANAGERIAL ACCOUNTING QUESTION GRP 2.4

6.11 Process Costing Questions 37 and 38 are based on the following information. A manufacturing company employs a process cost system. The company's product passes through both Department 1 and Department 2 in order to be completed. Conversion costs are incurred uniformly throughout the process in Department 2. The direct material is added in Department 2 when conversion is 80% complete. This direct material is a preservative that does not change the volume. Spoiled units are discovered at the final inspection and are recognized then for costing purposes. The physical flow of units for the current month is presented below. Beginning work-in-process in Department 2 (90% complete with respect to conversion costs) Transferred in from Department 1 14,000 76,000 80,000 Completed and transferred to finished goods Spoiled units-all normal 1,500 Ending work-in-process in Department 2 (60% complete with respect to conversion costs) 8,500 37. If the manufacturing company uses the weighted-average method, the equivalent units for direct materials in Department 2 for the current month would be A. 67,500 B. 80,000 C. 81,500 D. 90,000 38. If the manufacturing company uses the FIFO (first-in, first-out) method, the equivalent units for conversion costs in Department 2 for the current month would be A. 72,500 B. 74.000 C. 85,200 D. 86,600 39. In a process-costing system, the cost of abnormal spoilage should be A. Prorated between units transferred out and ending inventory. B. Included in the cost of units transferred out. C. Treated as a loss in the period incurred. D. Ignored