Question - Waykita Foods manufactures corn meal in a continous, mass production process. Corn is added at the beginning of the process. Normal losses are minimal and adnormal losses infrequently occur when foreign materials are found in the corn meal. Rountine inspection occurs at the 95 percent completion point as to conversion.
During May, a machine malfunctioned and dumped salt into 8.000 pounds of corn meal. This abnormal loss occurred when conversion was 70 peercent complete on those pounds of product. The error was immediatly noticed, and those pounds of corn were pulled from production process. An additional 2,000 pounds of meal were detected as unsuitable at the routine point. The 2,000 lost pounds were considered within reasonable limits. May production data follow:
a) Determine the number of EUP for direct material and for conversion, assuming a FIFO cost flow.
b) If the costs per EUP are $2.40 and $4.70 for direct material and conversion, respectively, what is the cost of the ending WIP Inventory?
c) What is the cost of abnormal loss? How is this cost treated in May?