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 Topic: Process Costing Question.. ( Topic Closed)
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studyingforcpa
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Joined: 26 May 2010
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| Posted: 15 Jun 2010 at 14:04 | IP Logged
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In Wiley BEC 2010, Pg303 MCQ28, is the answer incorrect or is my understanding perhaps wrong?
Q: Dept adds material at the beginning of a process and identifies defective units when the process is 40%. No Beginning WIP. At the end of the period, the number of WIP units equaled the number of unites transferred to finished goods. If all units in ending WIP were 66 2/3% complete, then ending WIP should be allocated:
a) 50% of all normal defective unit costs
b) 40 of all normal defective unit costs
c) 50% of all the material costs and 40% of the conversion costs of all normal defective unit costs
d) None of the normal defective unit costs.
Correct Ans is a)50% of all normal defective unit costs
However since 50% of the units that are in Ending WIP are 66.67% complete, since their EFU will be 66.67% of units in EndingWIP, shouldn't the correct answer be 33.33% i.e 66.67% of the 50% units remaining in WIP?
e.g. if there were 100 units,
50= Completed
50= Ending WIP. hence EFU for Ending WIP= 50 * 66.67%= 33.33
And so shouldn't it (Ending WIP) bear 33.33% of the normal defective unit cost?
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studyingforcpa
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| Posted: 16 Jun 2010 at 15:41 | IP Logged
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Well, I found the answer, and here it is in case anyone reading the above is still wondering - their answer is correct and = 50% of defective units. This is because it is allocated over all the good units. :)
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CPAbySeptember
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| Posted: 10 Aug 2010 at 12:31 | IP Logged
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Yeah I got this question wrong today also, but then I realize, when we calculate EFU, end WIP & FG are both "100% complete" for identifying defective units, since end WIP is 66% complete (over 40%). So since End WIP and FG are the same amount, End WIP gets 50% of the defective costs.
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