Management Accounting
Bucket Ltd. is concerned about the level of spoilage in their operation. Normal spoilage is deemed to be 4.0% of good units transferred out. Bucket uses the weighted average method. All direct materials for Bucketâ??s product are added at the beginning of the process.
At the beginning of the period there were 5,000 units in WIP inventory that were 50% complete with respect to conversion costs. During the period 20,000 units were started.
Spoilage is detected at the point where 10% of conversion is complete. During the period a total of 2,000 units were determined to be spoiled units. Closing WIP inventory had 4,000 units that were 40% complete with respect to conversion costs.
Based on this information how many physical units would be considered abnormal spoilage in the current period?
a. 760
b. 1,200
c. 1,240
d. 1,320
e. 2,000