Problem:
(Normal discrete spoilage; WA) The Potato Division of Global Foods Company
processes potatoes. In the process, raw potatoes are sequentially cleaned, skinned, cooked, and canned. Spoilage amounting to less than 12 percent of the total pounds of potatoes that are introduced to the cleaning operation is considered normal (in this case, normal spoilage is to include the weight of the potato peels). Inspection occurs when the products are 50 percent complete. Information that follows pertains to operations in the Potato Division for January 2000:
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Beginning WIP inventory (30% complete)
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500,000 pounds
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Started
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13,500,000 pounds
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Transferred
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11,400,000 pounds
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Ending WIP inventory (40% complete)
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750,000 pounds
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a. Compute the amount of spoilage in January. How much of the spoilage was normal?
b. Compute the equivalent units of production assuming the weighted average method is used.
c. Prepare a memo explaining why you might expect some (1) accretion in the canning operation and (2) some shrinkage other than the weight of the peels in one or more of the operations.