ACC 6404 Accounting Problem Worksheet Solution

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Description

Process Costing – Weighted Average With Spoilage
Mr. Smith, a consultant, has indicated that the Weighted Average method is appropriate our needs. He is concerned
about the number of units that failed inspection and the pricing of the good units completed.

General Information

The I See The Light Company has a related company that produces the figurines. They use process costing
in the molding department. The factory overhead is applied at a rate of 50% of direct labor dollars.
The material is added at the beginning of the process. The labor and overhead costs are assumed
to be added uniformly throughout.

Month of January

Selected information for January is presented below. Note that the applied overhead rate was
50% of direct labor costs in the molding department.

Molding Department

Goods in-process as of January 1 were 3,200 figurines at a cost of $5,312.00. Of this amount, $1,856.00 was from
raw materials added, $2,304.00 for labor and $1,152.00 for overhead. These 3,200 figurines were assumed to be
40.00% complete as to labor and overhead.

During January, 25,500 units were started, $14,790.00 of materials and $43,506.00 of labor costs were incurred.

The 6,500 figurines that were in-process at the end of January were assumed to be 50.00% complete to
labor and overhead.

While normal spoilage is 5%, 2,220 units failed inspection in January. The units are inspected at the end of the process.

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