Question

Colil Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $300,000 during the month. Work-in-process records revealed that 10,000 card units were started in January, 5,000 card units were complete, and 4,000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. 2. What is the direct material cost assigned to good units completed?

Answer 1

Direct materials purchases totaled $300,000 during the month

Card units started in January = 10,000

Completed card units = 5,000

Card units spoiled = 4,000

Ending work-in-process card units = 1,000

Out of the 10,000 card units started, 4,000 card units were spoiled as expected. Thus, spoilage is a normal loss. It will be borne by the remaining 6,000 good units.

Direct material cost per good unit = 300,000/6,000

= $50

Direct material cost assigned to good units completed = Completed good units x Direct material cost per good unit

= 5,000 x 50

= $250,000

Kindly comment if you need further assistance. Thanks