MA24 Problem: Process Costing

MA24 Problem: Process Costing

- Transferred In Costs & Spoilage – Wargo

Wargo Limited (“WL”) uses a process costing system in each of its two departments. Once unitshave been processed in Department A, they are transferred to Department B for further  processing. Material is applied at the beginning of the process in Department A and at 96%completion in Department B. Labour and overhead costs occur evenly throughout production in both Department A and B. The units are inspected at 80% completion in Department A and at95% completion in Department B. Normal spoilage is 2% for Dept A and 5% for Dept B.In the current period beginning WIP inventory in Department A was 25000 units (60%complete). This inventory incurred direct material costs of $97500 and conversion costs of $85000. The beginning WIP in Department B was 15000 units (90% completed). DepartmentB’s beginning WIP cost $135900 in transferred in costs and $162,000 in conversion cost.During the current period, in Department A 175,000 units were started, 165,000 units weretransferred out of Department A to Department B, and ending WIP in Department A was 30,000units (75% completed). In Department B 160,000 units were transferred to finished goods, andending WIP inventory was 10,000 units (50% completed).Costs incurred in each of the departments during the current period are:Department ADepartment BMaterial $612,500 $ 384,000Labour and Overhead $970,750 $2,704,750

Required

Using weighted average calculate for both Department A and B the:

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Cost of goods transferred

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Cost of ending WIP

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Spoiled unitsRound the cost per equivalent unit to five decimal places and round all other cost calculations tothe nearest dollar