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Management Accounting Process Costing

Daisy Ltd. uses FIFO process costing. The following information is for the current period production process. Each unit must pass through two separate processes, the Assembly and the Finishing departments. This information is for the Finishing department.

Direct materials are added at the beginning of the process, while conversion costs are added evenly through out the process. Inspection in the Finishing department occurs when the unit is 60% complete. Beginning work-in-process (30% complete) had 4,000 physical units. During the current year 27,500 units were transferred in from the Assembly department. Ending work in process inventory (80% complete) had 3,800 physical units. There were 25,750 physical units transferred from the Finishing department to Finished Goods inventory. Two percent (2.0%) of good units transferred out are considered to be normal spoilage.

Equivalent units have been calculated for this current period and they are 27,500 for transferred in, 27,500 for direct materials and 28,760 for conversion.

The beginning WIP inventory costs consisted of $10,000 for transferredin costs; $12,000 for direct materials and $33,000 for conversion costs. Current period costs are $350,000 for transferred in, $68,500 for direct materials and $180,500 for conversion. Based on this information what cost would be allocated to abnormal spoilage? (Use 4 decimal places when calculating the equivalent unit costs)

a. $9,777
b. $27,242
c. $29,699
d. $30,844
e. $33,400

Solution Summary

Management accounting process costing is examined.