Reference no: EM132562001

Red Chemical Inc. uses process costing system in its two producing departments. In department 2, inspection takes place at the 96% stage of completion, after which materials are added to good units. A spoilage rate of 3% of good output is considered normal.

Department 2 records for April shows:

Received from department 1                  30,000 units

Cost                                                   $135,000

Materials                                               $12,500

Conversion cost (labor + factory overhead)  $139,340

Transferred to finished goods                  25,000 units

Ending work in process inventory (50% complete)  4,200 units

Required:

Question 1: Computed the following:

a) Equivalent Production Units

b) Compute the per unit cost

c) Compute the cost of the units transferred to warehouse

d) Compute the cost of units in process on 30th April

e) explains how companies adjust their normal and abnormal losses during production