Question

Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then prepares the frozen fish fillets for distribution to its retail sales department. Direct materials are added at the initiation of the cycle. Conversion costs are incurred evenly throughout the production cycle. Before inspection, some fillets are spoiled due to undetectable defects. Inspection occurs when units are 40% converted. Spoiled fillets generally constitute 6% of the good fillets. Data for April 2017 are as follows:

WIP, beginning inventory 4/1/2017                                    85,000 fillets

        Direct materials (100% complete)

        Conversion costs (50% complete)

Started during April                                                             134,000 fillets

Completed and transferred out 4/30/2017                     183,000 fillets

WIP, ending inventory 4/30/2017                                        24,000 fillets

        Direct materials (100% complete)

        Conversion costs (25% complete)

Costs for April:

        WIP, beginning Inventory:

                Direct materials                                                               $140,000

                Conversion costs                                                                105,910

        Direct materials added                                                           309,000

        Conversion costs added                                                          390,130

What cost is allocated to abnormal spoilage using the weighted-average process-costing method? (Round any cost per unit calculations to the nearest cent.)

	A.	$ 0
	B.	$4610
	C.	$2091
	D.	$2106

Answer 1

The correct option is B: $4,610.

Compute equivalent units as follows;

	Physical Units	Equivalent Units
		Direct Materials	Conversion Costs
Work-in-process, Beginning	85,000
Started during current period	134,000
To account for	219,000
Goods units completed and transferred	183,000	183,000	183,000
Normal spoilage (183,000 × 6%)	10,980
(10,980 × 100%)		10,980	10,980
Abnormal spoilage	1,020
(1,020 × 100%)		1,020	1,020
Work-in-process, Ending	24,000
(24,000 × 100%) ; (24,000 × 25%)		24,000	6,000
Equivalent units		219,000	201,000

Compute cost allocated to abnormal spoilage:

	Total Costs	Direct Materials	Conversion Costs
Work-in-process, Beginning	$245,910	$140,000	$105,910
Costs added in current period	$699,130	$309,000	$390,130
Total costs incurred to date		$449,000	$496,040
÷ Equivalent units		219,000	201,000
Cost per equivalent unit		$2.05	$2.47
Costs allocated to abnormal spoilage:
(1,020 × $2.05);(1,020 × $2.47)	$4,610	$2,091	$2,519