Reference no: EM132700131

Problem - Mimasca Inc. manufactures various holiday masks. Each mask is shaped from a piece of rubber in the molding department. The masks are then transferred to the finishing department, where they are painted and have elastic bands attached. Mimasca uses the weighted average method. In May, the molding department reported the following data:

a. BWIP consisted of 15,000 units, 20% complete. Cost in beginning inventory totaled $1,656.

b. Costs added to production during the month were $26,094.

c. At the end of the month, 45,000 units were transferred out to finishing. Then, 5,000 units remained in EWIP, 25% complete.

Required -

1. Prepare a physical flow schedule.

2. Calculate equivalent units of production.

3. Compute unit cost.

4. Calculate the cost of goods transferred to finishing at the end of the month. Calculate the cost of ending inventory.

5. Assume that the masks are inspected at the end of the molding process. Of the 45,000 units inspected, 2,500 are rejected as faulty and are discarded. Thus, only 42,500 units are transferred to the finishing department. The manager of Mimasca considers all such spoilage as abnormal and does not want to assign any of this cost to the 42,500 good units produced and transferred to finishing. Your task is to determine the cost of this spoilage of 2,500 units and then to discuss how you would account for this spoilage cost. Now suppose that the manager feels that this spoilage cost is just part of the cost of producing the good units transferred out. Therefore, he wants to assign this cost to the good production. Explain how this would be handled.