Alpha Manufacturers Ltd manufactures tables in its Processing Department. Direct materials are included at the inception of the production…

Alpha Manufacturers Ltd manufactures tables in its Processing Department. Direct materials are included at the inception of the production…

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Alpha Manufacturers Ltd manufactures tables in its Processing Department. Direct materials are included at the inception of the production cycle and must be bundled in single kits for each unit. Conversion costs are incurred evenly
throughout the production process. Inspection takes place at the end of the production process. After inspection, some units are usually found to be spoiled due to non-detectable material defects. Such spoiled units generally constitute
4% of the good units completed and transferred out during the process. Alpha uses the First-In-First-Out (FIFO) method of process costing. Data provided for August 2022 are as follows:
The number of units in the beginning work in process inventory (BWIP) as at 1 August 2022 is 36,000 units, being 85% converted. The number of units started during August is 75,000 units, and the number of units completed and
transferred out during the month is 85,000 units.
The costs associated with the beginning work in process inventory (BWIP) consist of direct materials $72,000 and conversion costs $38,000.
The cost of direct materials added during the month of August is $125,400, and the cost of conversion incurred in the same month is $130,000.
The ending work in process inventory (EWIP) as at 31 August 2022 is 21,000 units, being 80% converted.
Based on the information provided, compute the following for Alpha Manufacturers Ltd, showing your workings and answers in the space below.
a. Compute the normal and abnormal spoilage units for the month of August 2022. (4 marks)
b. Compute the costs per equivalent unit of direct materials and conversion costs for the month of August. (4 marks)
c. Compute the costs associated with the normal and abnormal spoilage for the month of August. (2 marks)

Expert Answer:

Answer rating: 100% (QA)

a To compute the normal and abnormal spoilage units for the month of August 2022 we can use the information provided Number of units completed and tra
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