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Compute the amount of potential savings

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Problem - Normal and abnormal spoilage in units - The following data, in physical units, describe a grinding process for January:

Work in process, Beginning 19,000

Started during current period 150,000

To account for 169,000

Spoiled units 12,000

Good units completed and transferred out 132,000

Work in process, ending 25,000

Accounted for 169,000

Inspection occurs at the 100% completion stage. Normal spoilage is 5% of the good units passing inspection.

Required -

1. Compute the normal and abnormal spoilage in units.

2. Assume that the equivalent-unit cost of a spoiled unit is $10. Compute the amount of potential savings if all spoilage were eliminated, assuming that all other costs would be unaffected. Comment on your answer.

Reference no: EM133050051

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