Question 8.4

(Total: 20 marks)

Pepper Potts Pottery manufactures ceramic products. All direct materials are included at the inception of the production process. For March, there was no beginning inventory in the processing plant. Direct materials totaled $155,000 for the month. Work-in-process records revealed that 2,500 tons were started in March and that 1,500 tons were finished; 500 tons were spoiled as expected. Ending work-in-process units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete.

Required:

Determine the following:

1. What are the costs assigned to completed units when spoilage units are recognized and when they are not recognized in the cost per equivalent unit?
2. What are the costs transferred out if spoilage units are recognized and if they are ignored?
3. What are the amounts allocated to the work-in-process ending inventory when spoilage units are recognized and when spoilage units are ignored?