Question -
A. Silver Spoon Incorporated is a manufacturer of kitchen utensils. It produces all of its products in one department. The information for the current month is as follows:
Beginning work in process 37,500 units
Units started 55,000 units
Units completed 75,000 units
Ending work in process 14,500 units
Spoilage 3,000 units
Beginning work-in-process direct materials $25,000
Beginning work-in-process conversion $10,000
Direct materials added during month $113,750
Direct manufacturing labor during month $40,020
Beginning work in process was 25% complete as to conversion. Direct materials are added at the beginning of the process. Factory overhead is applied at a rate equal to 37.5% of direct manufacturing labor. Ending work in process was 60% complete. All spoilage is normal and is detected at the end of the process.
Required: Prepare a production cost worksheet if spoilage is recognized and the weighted-average method is used.
B. Busy Hands Craft Company is a small manufacturing company that specializes in arts and crafts items. It recently bought an old textile mill that it has refurbished to manufacture and dye special cloth to be sold in its craft shops. However, it discovered something new for its accounting system. The company never before had finished goods that did not meet standard, leftover materials from processing runs, or unacceptable outputs.
Required: As the business consultant for the company, explain how it can handle the items mentioned. Include any potential problems with the accounting procedures.