Problem:
1. Turkburg produces frozen turkey patties. In the Forming Department, ground turkey is formed into patties and cooked; an acceptable shrinkage loss for this department is 1 percent of the pounds started. The patties are then transferred to the Finishing Department where they are placed on buns, boxed, and frozen.
Turkburg uses a weighted average process costing system and has the following production and cost data for the Forming Department for May 2010:
Beginning WIP Inventory (80% complete as to conversion) ............2,000 pounds
Started ........................................................................... 250,000 pounds
Transferred to Finishing (357,300 patties) ................................... 238,200 pounds
Ending inventory (30% complete as to conversion) .......................6,000 pounds
Beginning inventory cost of turkey ......................................... $1,807
May cost of turkey ......................................................... $240,208
Beginning inventory conversion cost ........................................ $150
May conversion cost ........................................................ $24,380
a. What is the total shrinkage (in pounds)?
b. How much of the shrinkage is classified as normal? How is it treated for accounting purposes?
c. How much of the shrinkage is classified as abnormal? How is it treated for accounting purposes?
d. What are the May 2010 equivalent units of production in the Forming Department for direct materials and conversion?
e. What is the total cost of the patties transferred to the Finishing Department? Cost of ending inventory? Cost of abnormal spoilage?
f. How might Turkburg reduce its shrinkage loss? How, if at all, would your solution(s) affect costs and selling prices?
g. What might have been the cause of the abnormally high spoilage in May? Use calculations to support your answer.