Hi,
I'm confused on the logic of this answer. Can anyone elaborate on why the units transferred is 16,000, but in the math to get to the 154,850 they are using the 16,300?
I understand that the normal spoilage in process costing get's charged to the good units, so my best guess was 16,300 and 154,850.
Southwood Industries uses a process costing system and inspects its goods at the end of manufacturing. The inspection as
of June 30 revealed the following information for the month of June.
Unit costs were: materials, $3.50; and conversion costs, $6.00. The number of units that Southwood would transfer to its
finished goods inventory and the related cost of these units are
A)Units Transferred = 16,000, Cost = $155,800.
B) Units Transferred = 16,000, Cost = $152,000.
C) Units Transferred = 16,300, Cost = $154,850.
D) Units Transferred = 16,000, Cost = $154,850.
Feedback
The correct answer is: D) Units Transferred = 16,000, Cost = $154,850.
Using process costing, normal spoilage costs are "spread" over the cost of the 16,000 good units.
Abnormal spoilage costs are charged to a loss account. 16,000 good units were produced and
transferred.
The cost of these units is calculated as follows:
Per unit cost, units transferred to finished goods inventory = (materials cost per unit) + (conversion cost
per unit)
Per unit cost, units transferred to finished goods inventory = ($3.50) + ($6.00) = $9.50.
Total cost of units transferred to finished goods inventory = (16,300 units)($9.50) = $154,850.
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Stephanie Midura
Accountant
Big Y Foods Inc
Springfield MA
United States
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