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Craft Concept manufactures small tables in its Processing Department. Direct Materials are added at the initiation of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some units are spoiled due to non- detectable materials defects. Inspection occurs at the end of the process. Spoiled units generally constitute 5 percent of the good units. Data for December are as follows:

WIP, Beginning inventory Dec 1	10,000 units
Direct materials: 100% complete
Conversion costs: 75% complete
Started during December	40,000 units
Completed and Transferred Out during month	38,400 units
WIP, Ending inventory December 31	8,000 units
Direct materials: 100% complete
Conversion costs: 65% complete
Costs:
WIP, Beginning Inventory:
Direct materials	$50,000
Conversion costs	30,000
Direct materials added during December	100,000
Conversion costs added during December	140,000

What is the number of total spoiled units?

a.	2,700 units
b.	1,600 units
c.	3,600 units
d.	2,000 units
e.	4,500 units