This answer includes the costs of abnormal spoilage and normal spoilage in the cost of good units. Only the cost of normal spoilage should be included.
This answer results from dividing the total cost of $2,200 by the 500 good units that were produced to calculate the cost per unit. The total cost should be divided by the total number of units worked on, which includes all of the spoiled units.
This answer includes the cost of abnormal spoilage in the cost of good units, instead of normal spoilage.
When the cost of normal spoilage is not accounted for separately, it is simply transferred to the next department as part of the cost of the good units. We need to calculate the cost per unit of all units produced — both good and spoiled units. In total 550 units were produced at a cost of $2,200. This is a cost per unit of $4.00. The cost for the 500 good units and the 30 normally spoiled units is transferred to the next department. This is 530 units at $4.00 per unit, or $2,120.
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