Kelly Ltd uses a weighted-average process costing system that calculates normal rework as 2% of the units passing inspection. The inspection point is at the 75% point and units failing inspection are returned to the 40% point. During the current period, 50,000 units were started; 62,000 units inspected; and 52,000 units completed. Direct material is added at the 50% point and conversion costs occur uniformly. Beginning work in process was 10,000 units, 55% complete and ending work in process was 8,000 units, 85% complete. Costs per equivalent unit for material were $1.00 and $3.00 for conversion costs. The number of units reworked was
A) 3,000
B) 2,000
C) 8,000
D) 10,000

Question

Quizplus · Accepted Answer

Units that fail inspection are sent back to the 40% point, meaning 60% of the work has been completed. Therefore, these units will need an additional 40% of completion to be completed. The calculation of the equivalent units for the rework is:

Equivalent units rework = (Units failing inspection) x (Percentage that needs to be completed)
Equivalent units rework = (62,000 - 52,000) x 40% = 2,000

Therefore, the number of units reworked is 2,000.

Kelly Ltd Uses a Weighted-Average Process Costing System That Calculates