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.
1. Compute the normal and abnormal spoilage in units. Required
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.