Reference no: EM132185280
Question - S.E. Ltd uses process costing and weighted average method of cost valuation for its products. Product X is produced in department Z and transferred to the finished goods warehouse when completed. Given below is cost information for department Z during the month of July 2015:
Work in process (WIP), 1 July 2015 - $15,908
Manufacturing costs added in department Z during July
Direct materials used - $197,815
Conversion costs - $405,087 $602,902
Total manufacturing costs, department Z - $618,810
The cost of WIP in department Z at 1 July included $6,230 of direct material cost. The 3,500 units in WIP at 1 July were 70% complete. A total of 108,000 units were started during July and 100,000 units were completed and transferred out. At the end of July, 6,500 units remained uncompleted. The ending WIP inventory was 40% complete.
In department Z, direct material is added at the beginning of the manufacturing process whilst conversion costs are incurred evenly throughout the manufacturing process. Inspection in department Z takes place when the products are 75% complete. Normal spoilage is set at 6% of good units produced.
(a) Compute the cost per equivalent unit for each product cost category in department Z for the month of July 2015.
(b) Based on the information obtained in (a) compute the unit cost of product X for the month of July 2015. (Give your answer to the nearest cent). Write a journal entry to record the transfer of the good completed products for the month of July 2015. (Narrations are not required.)
(c) Compute the value of goods in the WIP account at the end of July 2015.
(d) Should abnormal spoilage costs be included as part of product costs? Discuss.