Understood. But even if you take the normal spoilage out, it still leaves you with an answer that's not an option.
The full question is below:
A manufacturing company employs a process cost system. The company's product passes through both Department 1 and Department 2 in order to be completed. Conversion costs are incurred uniformly throughout the process in Department 2. The direct material is added in Department 2 when conversion is 80% complete. This direct material is a preservative that does not change the volume. Spoiled units are discovered at the final inspection and are recognized then for costing purposes. The physical flow of units for the current month is presented below.
Beg. WIP in Dept 2 (90% complete with respect to conversion costs): 14,000
Transferred in from Department 1: 76,000
Completed and transferred to finished goods: 80,000
Spoiled units – all normal: 1,500
Ending WIP in Dept 2 (60% complete with respect to conversion costs): 8,500
If the manufacturing company uses the weighted-average method, the equivalent units for direct materials in Department 2 for the current month would be:
A. 80,000
B. 90,000
C. 81,500
D. 67,500
The software says the answer is C. I don't understand why, though. My understanding is that the calculation would go like this:
80,000 + (8,500*60%) – (14,000*90%) + 1,500 = 74,000
The answer, however, only adds the 80,000 to the spoilage amount of 1,500. Why???
AUD: 86
REG: 81
BEC: 71, 11/2014
FAR: 10/4/2014
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