Question 2 (35 marks) Wing Shun Ltd (Wing Shun) produces a soft drink product called "Super". The company adopts the first-in, first-out (FIFO) method of process costing for its manufacturing operations. Direct materials are added when the production process is 10% complete, and conversion costs are added evenly during the process. Some units of this product are spoiled as a result of defects not detectable until Wing Shun inspects at the 60% stage of completion. Spoiled units are disposed of at zero net disposal value. The following is the company's production data in June 2020 Beginning work in process (1 June) Degree of completion of beginning work in process Started in June Goods units completed and transferred out during June Work in process, ending inventory (June 30) Degree of completion of ending work in process Total costs added during June Normal spoilage as a percentage of good units Degree of completion of normal spoilage Degree of completion of abnormal spoilage Physical Direct Conversion Units Materials Costs (Super) 30,000 $2,900,000 $320,000 ? 30% 50,000 50,000 16,000 ? 20% 11,600,000 $5,529,000 10% ? ? ? ? Required: (a) For each cost category, compute equivalent units. Show physical units (20 marks) in the first column of your schedule. (7 marks) (b) Summarize the total costs to account for; calculate the cost per equivalent unit for each cost category; and assign costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process. (C) Managers do not care about whether the spoilage is normal or abnormal because both of them are considered costs to a company.' (8 marks) Comment on the statement above. Question 2 (35 marks) Wing Shun Ltd (Wing Shun) produces a soft drink product called "Super". The company adopts the first-in, first-out (FIFO) method of process costing for its manufacturing operations. Direct materials are added when the production process is 10% complete, and conversion costs are added evenly during the process. Some units of this product are spoiled as a result of defects not detectable until Wing Shun inspects at the 60% stage of completion. Spoiled units are disposed of at zero net disposal value. The following is the company's production data in June 2020 Beginning work in process (1 June) Degree of completion of beginning work in process Started in June Goods units completed and transferred out during June Work in process, ending inventory (June 30) Degree of completion of ending work in process Total costs added during June Normal spoilage as a percentage of good units Degree of completion of normal spoilage Degree of completion of abnormal spoilage Physical Direct Conversion Units Materials Costs (Super) 30,000 $2,900,000 $320,000 ? 30% 50,000 50,000 16,000 ? 20% 11,600,000 $5,529,000 10% ? ? ? ? Required: (a) For each cost category, compute equivalent units. Show physical units (20 marks) in the first column of your schedule. (7 marks) (b) Summarize the total costs to account for; calculate the cost per equivalent unit for each cost category; and assign costs to units completed and transferred out (including normal spoilage), to abnormal spoilage, and to units in ending work in process. (C) Managers do not care about whether the spoilage is normal or abnormal because both of them are considered costs to a company.' (8 marks) Comment on the statement above
