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    Disposition Cost

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    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.

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    https://brainmass.com/business/weighted-average-cost-of-capital/6850

    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.

    $2.49

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