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Option #1: DPC and Weighted Average Method DPC manufactures medical testing strips in a continuou…

by Essaynice Tutors | Sep 9, 2023 | accounting

Option #1: DPC and Weighted Average Method

DPC manufactures medical testing strips in a continuous process
environment.

Direct materials are added at the beginning of the process.
Conversion costs are added throughout the manufacturing process.
The manufacturer has a computer-aided quality control step that

rejects 1.5% of the production for defects.

Requirements:

Compute the numbers for normal and abnormal spoilage.

Compute the equivalent units.

Compute the cost per unit completed and transferred out of the
process.

Summarize the total costs to account for, compute the cost per
equivalent units, and assign costs.

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

WIP , Beginning

10,000

250,000

100,000

Degree of completion,
beginning WIP

100%

50%

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 spoliage as a % of good units

1.5 % of good units

Degree of completion of normal goods

100%

Degree of completion of abnormal
goods

100%

Required:

1). Compute the units to
account for, number of normal spoilage and number of abnormal
spoilage.

2). Compute the Equivalent Units.

3). Compute the cost per unit
and completed and transferred out of the process.

4). Compute the total costs to
account for, compute cost per equivalent unit, and assign
costs.

Step 1: Determine
the physical flow of Units

Weighted average Costing

Physical Units

Direct Material

Conversion Costs

WIP , Beginning

Degree of
completion, beginning WIP

Started this period

TOTAL UNITS TO ACCOUNT
FOR:

Good units completed and transferred

WIP , ending inventory

TOTAL UNITS ACCOUNTED
FOR:

Degree of completion of
ending WIP

Total costs added this period

Step Two compute Spoilage:

Identify the number of normal
and abnormal spoilage

Normal Spoilage=

Abnormal Spoilage =

Total Spoilage

Step 3: compute equivalent Units of Production
Weighted eqivalent units
		Total Production costs	Direct Material	Conversion Costs	Notes

	WIP, beginning

	started during the period

	to Account for

	Goods units completed and transferred

	Normal spoilage

	Abnormal Spoilage

	WIP, ending

	Accounted for

	Equivalent units for WIP

Step 4: compute the cost per equivalent Units (EUP)
Weighted eqivalent units
		Total Production costs	Direct Material	Conversion Costs

	WIP, beginning

	costs added in current period

	total costs to account for


	divide by

	cost per equivalent unit


STEP 5 Assign and Reconcile Costs
	Assignment of costs

	good units completed and transferred out

	WIP, Ending

	goods units completed and transferred out

	costs added before normal spoilage



	normal spoilage

	total costs of goods units completed

	abnormal spoilage

	Total costs account for