Chapter 18, Problem 18.20E

Normal and abnormal spoilage in units. The following data, in physical units, describe a grinding process for January:

Work in process, beginning	19,300
Started during current period	145,400
To account for	164,700
Spoiled units	12,000
Good units completed and transferred out	128,000
Work in process, ending	24,700
Accounted for	164,700

Inspection occurs at the 100% completion stage. Normal spoilage is 5% of the good units passing inspection.

1. 1. Compute the normal and abnormal spoilage in units.

Required

1. 2. Assume that the equivalent-unit cost of a spoiled unit is $8. Compute the amount of potential savings if all spoilage were eliminated, assuming that all other costs would be unaffected. Comment on your answer.