Colil Computer Systems, Inc., manufactures printer circuit cards. All direct mat

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 $308,000 during the month. Work in process records revealed that 13,000 card units were started in January, 6,500 card units were complete, and 6,200 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.

What is the amount allocated to the

work in process ending inventory?

Explanation / Answer

Asnwer is D. $ 7107

Explanation is as follows: Spoilage is treated as abnormal loss.Hence, the calculations ias follows:

Completed units of Finished goods    = 6500 units (100% complete)

Abnormal loss units                         = 6200 units (100% complete as loss detected on completion)

Closing WIP units                            =   300 units (100% complete in respect to material )

Total equivalent unit for material         = 13,000 units

Total cost of material                         = $308,000

Material cost per equivalent unit         = $ 23.69 per equivalent unit

Material cost in Closing WIP(300 units @23.69) = $ 7107

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