Disposition Cost
In the lamination department, varnish is added when the goods are 60% complete as to overhead. The units that are spoiled during processing are found upon inspection at the end of production. Spoilage is considered discrete.
Production Data For March
Beg.Inv.(80% complete as to labor,
70% complete as to overhead): 1,000 units
Transferred in during month 7,450 units
End. Inv.(40% complete as to labor
20% complete as to Overhead) 1,500 units
Normal Spoilage(found in final inspec) 100 units
Abnormal Spoilage(Found @ 30%completion
of direct labor & 15% of conversion) 200 units
All other units were transferred to finished Goods.
Cost Data For March
BWIP Inventory:
Prior Department Costs $7,510
Varnish 950
Direct Labor 2,194
Overhead 5,522
_________
$16,176
Current Period Costs:
Prior department costs $68,540
Varnish 7,015
Direct labor 23,000
Overhead 56,782
__________
$155,337
_________
Total costs to account for $171,513
REQUIRED: Determine the proper disposition of the March costs for the Laminating Department using the Weighted Average Method.
Solution Preview
Number of complete units made and transferred = 1,000 + 7,450 - 1,500 - 100 - 200 = 6,650.
<br>
<br>The number of units with prior department costs = 1,000 + 7,450 = 8,450.
<br>The total prior department costs = $7,510 + $68,540 = $76,050.
<br>The prior department cost per unit = $76,050 / 8,450 = $9.00.
<br>
<br>Equivalent full labor units = 1,000 + 7,450 - (0.6 * 1,500) - (0.7 * 200) = 7,410.
<br>This is calculated as follows: there are 1,000 + 7,450 = 8,450 ...
Solution Summary
This solution determines the proper cost of disposition (spoilage) using a weighted average method.