ACC 6404 Accounting Problem Worksheet

 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.