Question
Pacific Inc began April with an inventory of 2,500 units. Its production process incurs conversion costs uniformly. It started 72,500 units into production. Pacific Inc
Pacific Inc began April with an inventory of 2,500 units. Its production process incurs conversion costs uniformly. It started 72,500 units into production.
Pacific Inc determines that the 3,500 units in its ending WIP is 40% complete for conversion and values this inventory (before adjustments for any spoilage cost) at $16 per unit. It also determines that the cost of the completed units is $1,493,625.
Based on inspection (at the 90% point), Pacific Inc determines that the cost of the 500 units of normal spoilage is $9,500. The cost of the 125 abnormal spoilage is ($2,375). That is, there is an abnormal gain.
What is the adjusted cost of the ending WIP?
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