Reference no: EM133016176

Question - Ella Foods manufactures corn meal in a continuous, mass production process. Corn is added at the beginning of the process. Normal losses are minimal and abnormal losses infrequently occur when foreign materials are found in the corn meal. Routine inspection occurs at the 95% completion as to conversion.

During May, a machine malfunctioned and dumped salt into 8,000 pounds of cornmeal. This abnormal loss occurred when conversion was 70% complete on those pounds of product. The error was immediately noticed and those pounds of cornmeal were pulled out from the production process. Two thousand additional pounds of corn meal were detected as unsuitable at the routine inspection point; this amount was considered within normal limits. Production data for the month follow:

Beginning WIP Inventory, 85% complete 40,000 pounds

Started during the month 425,000 pounds

Ending WIP Inventory, 25% complete 10,000 pounds

1. Determine the number of EUP for direct materials and for conversion costs, assuming a FIFO cost flow.

2. If the costs per EUP are P0.08 and P0.15 for direct materials and conversion cost, respectively, what is the cost of the ending WIP Inventory?

3. What is the cost of abnormal loss?

4. Prepare the entry to record the abnormal loss.