Colil Computer Systems, Inc., manufactures printer circuit cards. All direct materials are added at the inception of the production process. During January, the accounting department noted that there was no beginning inventory. Direct materials purchases totaled $300,000 during the month. Work-in-process records revealed that 10,000 card units were started in January, 5,000 card units were complete, and 4,000 card units were spoiled as expected. Ending work-in-process card units are complete in respect to direct materials costs. Spoilage is not detected until the process is complete. What is the amount allocated to the work-in-process ending inventory?

amount allocated to the work-in-process ending inventory $ 30,000

Explanation:

Spoilage is treated as abnormal loss.

Completed units of Finished goods = 5000 units (100% complete)

Abnormal loss units = 4000 units (100% complete as loss detected on completion)

Closing WIP units = 1000 units (100% complete in respect to material)

Total equivalent unit for material = 10,000 units

Total cost of material = $300,000

Material cost per equivalent unit = $ 30 per equivalent unit

Material cost in Closing WIP (1000 units @30) = $ 30,000

The amount allocated to the work-in-process ending inventory is $30,000

Explanation:

For computing the allocated amount for ending work in progress, first, we have to compute the per unit cost which is shown below:

Per unit cost = (Total cost) : (total number of units)

where,

Total cost is $300,000

And, the total number of units equal to

= Units started + spoiled units + ending work in progress units

= 5,000 units + 4,000 units + 1,000 units

= 10,000 units

The closing units is

= Total units - Units started - spoiled units

= 10,000 - 5,000 - 4,000

= 1,000 units

Now put these values to the above formula

So, the per unit would equal to

= $300,000 : 10,000 units

= $30

So, the ending work in progress is

= Ending work in progress units * per unit

= 1,000 units * 30

= $30,000