Tong Ltd is a manufacturing company that uses a process costing system. All direct material is added at the start of the process, and spoilage is discovered at the end. During the first period of operations 15,000 units of material were placed into production at a cost of $20 each (ignore conversion costs for this process). Ending work in process was 2,000 units, good units completed totaled 11,000 units, and normal spoilage is 15% of the units surviving inspection. Inspection takes place after the units are completed. The unit cost assigned to the good units completed is
A) $-0-
B) $20.00
C) $24.00
D) $23.00

Question

Quizplus · Accepted Answer

- Direct material cost = 15,000 units × $20 per unit = $300,000
- Cost of normal spoilage = 11,000 units × 15% = 1,650 units × $20 per unit = $33,000
- Total cost of good units completed = Direct material cost − Cost of normal spoilage = $300,000 − $33,000 = $267,000
- Unit cost of good units completed = Total cost of good units completed / Good units completed = $267,000 / 11,000 units = $24.00 per unit.

Therefore, the correct answer is D, with the unit cost assigned to the good units completed being $24.00.

Tong Ltd Is a Manufacturing Company That Uses a Process