Accounting -Kabana Industries manufactures widgets in two stages.

| January 31, 2017

Question
BUSI 294

Assignment – Process Costing and Spoilage

Kabana Industries manufactures widgets in two stages. The first phase of production occurs in the Assembly Department. Units are then transferred to the Finishing Department where the product is finished and packaged for shipment to distributors. This question deals with the Finishing Department.

The Finishing Department adds material (Material “A”) to the widget as soon as it is received from the Assembly Department. Packaging material (Material “B”) is added when the production is 95% complete. Inspection takes place when production is 85% complete.

Following is the data recorded for the Finishing Department for the month of September:

Units of beginning work-in-process inventory

15,625

Units of ending work-in-process inventory

31,250

Percentage completion of units in beginning work-in-process inventory

55%

Cost of Material “A” in beginning work-in-process inventory

$171,875

Cost of Material “B” in beginning work-in-process inventory

?

Transferred-in cost in beginning work-in-process inventory

$187,500

Conversions costs in beginning work-in-process inventory

$359,375

Percentage completion of units in ending work-in-process inventory

92%

Costs of Material “A” added in the month of September

$835,800

Costs of Material “B” added in the month of September

$93,750

Conversion costs added during September

$1,968,750

Transferred-in costs added during September

$1,317,975

Units started in September

109,375

Units completed and transferred to finished goods inventory

78,125

Normal spoilage is 5% of all good units that pass inspection. The company pro-rates the normal spoilage between cost of goods manufactured and ending work-in-process. The company uses the weighted average method for cost assignment.

Required:

For September, prepare a production report, summarizing total costs to account for and assigning the costs to units completed and transferred out, to abnormal spoilage and to units in ending work-in-process.

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