Problem:
(EUP computations; normal and abnormal loss) The Atlanta Division of Southeastern Paint produces environmental paints in processes in which spoilage takes place on a continual basis. Management considers normal spoilage to be 0.5 percent or less of gallons of material placed into production. The following operating statistics are available for June 2000 for the paint BMZ:
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Beginning inventory (20% complete as to material; 30% complete
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8,000 gallons
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as to conversion)
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180,000 gallons
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Started during June
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Ending inventory (60% complete as to material; 70% complete
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as to conversion)
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4,000 gallons
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Spoiled
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1,400 gallons
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a. How many gallons were transferred out?
b. How much normal spoilage occurred?
c. How much abnormal spoilage occurred?
d. What are the FIFO equivalent units of production for materials? For conversion costs?
e. How are costs associated with the normal spoilage handled?
f. How are costs associated with the abnormal spoilage handled?