Question
Wattle Ltd produces a single product, Coco, which passes through two processes before it is completed. Spoilage is detected at the end of the Process
Wattle Ltd produces a single product, Coco, which passes through two processes before it is completed. Spoilage is detected at the end of the Process 2 before Coco is packed.
Units received from Process 1 are entered at the start of Process 2. Material X is added at the 50% point in Process 2, and package Material P, is added at the end of the process to the units that have successfully passed inspection. The inspection point is at the end of Process 2 just before Material P is added. Conversion costs are added uniformly throughout the process.
Management considers that spoilage of up to 5% of good output (i.e. units completed) would be considered normal. The cost of the normal spoilage is added to the good units leaving production.
Due to plant breakdown, abnormal spoilage occurred immediately after Material X was added. Abnormal spoilage is to be recorded in a separate Abnormal Spoilage account.
Wattle Ltd uses the Weighted Average method to value inventory.
Required: Calculate the following for process 2:
Cost per unit, using weighted average cost, for each component of cost. (Round to 2 decimal places)
Value of closing Work in Process (Round to whole dollars)
Value of abnormal Spoilage (Round to whole dollars)
Value of Transfers out (Round to whole dollars)
Wattle Ltd uses the Weighted Average method to value inventory. Details of Process 2 for September were: Units Work in Process 1 September - 40\% complete 2,500 Transfer in from Process 1 12,500 Completed 10,500 Spoilage (Normal units 525, Abnormal units 475) 1,000 Work in Process 30 September - 30% complete 3,500 Details of Costs Value of Work in Process 1 September $ - Transfers in from Process 1 5,000 - Conversion Costs 8,000 Costs for September - Transfers in Process 28,000 - Material X issued 46,000 - Material P issued 4,200 - Conversion Costs 94,910
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