Solved: APCO Company manufactures various lines of

bicycles Because of

APCO Company manufactures various lines of bicycles. Because of the high volume of each
line, the company employs a process cost system using the weighted-average method to
determine unit costs. Bicycle parts are manufactured in the molding department and then are
consolidated into a single bike unit in the molding department and transferred to the assembly
department where they are partially assembled. After assembly, the bicycle is sent to the
packing department. Annual cost and production figures for the assembly department are
presented in the schedules that follow. Defective bicycles are identified at the inspection point
when the assembly labor process is 70 percent complete; all assembly materials have been
added at this point. The normal rejection for defective bicycles is 5 percent of the bicycles
reaching the inspection point. Any defective bicycles above the 5 percent quota are considered
to be abnormal. All defective bikes are removed from the production process and destroyed.

Required
1. Compute the number of defective, or spoiled, bikes that are considered to be
a. Normal.
b. Abnormal.
2. Compute the equivalent units of production for the year for
a. Bicycles transferred in from the molding department.
b. Bicycles produced with regard to assembly material.
c. Bicycles produced with regard to assembly conversion.
3. Compute the cost per equivalent unit for the fully assembled bike.
4. Compute the amount of the total production cost of $1,672,020 that will be associated with
the following items:
a. Normal spoiled units.
b. Abnormal spoiled units.
c. Good units completed in the assembly department.
d. Ending work-in-process inventory in the assembly department.
5. Describe how to present the applicable dollar amounts for the following items in the financial
statements:
a. Normal spoiled units.
b. Abnormal spoiled units.
c. Completed units transferred in to the packing department.

(CMAAdapted)

ANSWER
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