Giddings Pharmaceutical Company Is a Maker of Drugs for High

question 76

Multiple Choice

Giddings Pharmaceutical Company is a maker of drugs for high blood pressure and uses a process costing system. The following information pertains to the final department of Giddings's blockbuster drug called Solcax. $\begin{array}{lr}\text { Beginning work-in-process }(40 \% \text { completed) } & 800 \text { units } \\\text { Transferred-in } & 4,000 \text { units } \\\text { Normal spoilage } & 400 \text { units } \\\text { Abnormal spoilage } & 200 \text { units } \\\text { Good units transferred out } & 3,600 \text { units } \\\text { Ending work-in-process }(1 / 3 \text { completed) } & 600 \text { units }\\\text { Conversion costs in beginning inventory } & \$ 2,560 \\\text { Current conversion costs } & \$ 6,900\end{array}$ Giddings calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of Solcax that are spoiled are the result of defects not discovered before inspection of finished units. Materials are added at the beginning of the process. Using the weighted-average method, answer the following question:
What are the total conversion costs of abnormal spoilage?

• A) $375.
• B) $430.
• C) $625.
• D) $860.

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Definitions:

Labor Rate Variance

The difference between the actual labor rate paid and the standard or expected labor rate, impacting the total cost of production.

September

September, as identified in the Gregorian calendar system.

Materials Quantity Variance

The difference between the actual amount of materials used in production and the expected amount, which can indicate efficiency or waste in the use of raw materials.

June

The sixth month of the year in the Gregorian calendar, known for marking the beginning of summer in the Northern Hemisphere.