Dekalb Processing Company DPC DPC manufactures medical testi

Dekalb Processing Company (DPC) DPC manufactures medical testing strips. This is a continous Process enviroment. Direct Material are added at the beginning of the process. Conversion costs are adding all during the manufacturing process. The manufacturing has a computer aided quality control step which rejects 1.5% of the production for defects. Summary data for this period are as follows Physical Units Direct Material Conversion Costs 250,000 100% WIP, Beginning 100,000 50% 10,000 Degree of completion, beginning WIP Started this period 12,000 TOTAL UNITS TO ACCOUNT FOR Good units completed and transferred WIP, ending inventory 2,000 TOTAL UNITS ACCOUNTED FOR Degree of completion of ending WIP 100% 60% Total costs added this period 500,000 $ 250,000 Normal spoilage as a % of good units 1.5 % of good units Degree of completion of normal goods Degree of completion of abnormal goods 100% 100% 100% 100%

Solution

Step 1 : Determine the physical flow of units Weighted Average Costing Physical Units Direct Material Conversion cost WIP, Beginning 10000 10000 10000 Degree of completion 100% 50% Started This Period 12000 TOTAL UNITS TO ACCOUNT FOR: 22000 Goods units completed and transferred 20000 WIP, ending inventory 2000 TOTAL UNITS ACCOUNTED FOR 22000 Degree of completion of Ending WIP 100% 60% Total costs added this period 500000 250000 Step 2: Compute Spoilage Normal Spoilage (1.5% of 20000) 300 Abnormal Spoilage 0 Total Spoilage 300 Step 3: Compute Equivalent Units of Prodution Weighted Equivalent Units Total Production Costs Direct Material Conversion Costs WIP beginning 350000 10000 10000 Completion % 100% 100% Equivalent Units 350000 10000 10000 Started During the period 750000 12000 12000 To Account for 1100000 22000 22000 Goods units completed and transferred 19700 19700 (20000-300) Completion % 100% 100% Equivalent Units 19700 19700 Normal Spoilage 300 300 Completion % 100% 100% Equivalent Units 300 300 Abnormal Spoilage 0 0 WIP, ending 2000 2000 Completion % 100% 60% Equivalent Units 2000 1200 Accounted for 22000 22000 Equivalent Units 22000 21200 Step 4: Compute the cost per equivalent units (EUP) Weighted Equivalent Units Total Production Costs Direct Material Conversion Costs WIP, Beginning 350000 250000 100000 costs added during the period 750000 500000 250000 Total costs to account for 1100000 750000 350000 Divide by 22000 21200 Cost per equivalent unit 34.09 16.51 Step 5: Assign costs and reconcile costs Total Production Costs Direct Material Conversion Costs Assignment of costs Goods units completed and transferred 19700 19700 WIP ending 2000 1200 Goods units completed and transferred Costs added before normal spoilage (A) 996826.76 671590.91 325235.85 (671590.91+325235.85) (19700*34.09) (19700*16.51) Normal Spoilage (B) 15180.10 10227.27 4952.83 (10227.27+4952.83) (300*34.09) (300*16.51) Total costs of goods units completed (C=A+B) 1012006.86 681818.18 330188.68 abnormal Spoilage 0 0 0 WIP ending (D) 87993.14 68181.82 19811.32 (68181.82+19811.32) (2000*34.09) (1200*16.51) Total costs accounted for (C+D) 1100000.00 750000.00 350000.00