Friday 12 October 2012

Chipcity is a fast-growing manufacturer of computer chips. Direct materials are added at the start of the production

Problem 24: Weighted-average method, spoiling. Chipcity is a fast-growing manufacturer of computer chips. Direct materials are added at the start of the production process. Conversion costs are added evenly during the process. Some units of this product are spoiled as a result of defects not detectable before inspection of finished goods. Spoiled units are disposed of at zero net disposal value. Chipcity uses the weighted-average method of processing costing.

Summary data for September 2008 are:

                               A                                                                                         B                                            C                                                  D

1.                                                                                                                  Physical Units                        Direct                                     Conversion

                                                                                                                    (Computer Chips)                 Materials                                       Cost

2. Work in process, beginning inventory (September 1)                          600                               $96,000                                      $15,300

3.   Degree of completion of beginning work in process                                                                     100%                                              30%

4. Started during September                                                                       2,550

5. Good units completed and transferred out during September        2,100

6. Work in process. Ending inventory (September 30)                               450

7. Degree of completion of ending work in process                                                                          100%                                                40%

8. Total costs added during September                                                                                         $567,000                                          230,000

9. Normal spoilage as a percentage of good unit                                          15%

10. Degree of completion of normal spoilage                                                                                     100%                                                 100%

11. Degree of completion of abnormal spoilage                                                                                 100%                                                 100%

 

 

Question 1: For each cost category, compute equivalent units. Show physical units in the first column of your schedule.

 

Question 2: Summarize total costs to account for, calculate cost per equivalent unit for each cost category, and assign total costs to units completed and transferred out (including normal spoilage, to abnormal spoilage, and to units in ending work in process.

 



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