ACCT 152 ch 4

Calculate the Blending Department's equivalent units of production for materials and conversion in June.

Equivalent units of production: Materials Conversion Transferred to next department 160,000 160,000 Equivalent units in ending work in process inventory: Materials: 40,000 units × 100% complete 40,000 Conversion: 40,000 units × 25% complete 10,000 Equivalent units of production 200,000 170,000

4. The manager of the Mixing Department stated, "Materials prices jumped from about $2.50 per unit in March to $3 per unit in April, but due to good cost control I was able to hold our materials cost to less than $3 per unit for the month." Should this manager be rewarded for good cost control?

No, the manager should not be rewarded for good cost control. The Mixing Department's low unit cost for April occurred because the costs of the prior month have been averaged in with April's costs. This is a major criticism of the weighted-average method. Costs computed for product costing purposes should not be used to evaluate cost control or to measure performance for the current period.

1. What were the Mixing Department's equivalent units of production for materials and conversion for April?

Equivalent units of production Materials Conversion Transferred to next department 190,000 190,000 Equivalent units in ending work in process inventory: Materials: 40,000 units × 75% complete 30,000 Conversion: 40,000 units × 60% complete 24,000 Equivalent units of production 220,000 214,000

1. Prepare journal entries to record the costs incurred in both the Refining Department and Blending Department during March. Key your entries to the items (a) through (g) below. a. Raw materials used in production. b. Direct labor costs incurred. c. Manufacturing overhead costs incurred for the entire factory, $225,000. (Credit Accounts Payable.) d. Manufacturing overhead was applied to production using a predetermined overhead rate. e. Units that were complete with respect to processing in the Refining Department were transferred to the Blending Department, $740,000. f. Units that were complete with respect to processing in the Blending Department were transferred to Finished Goods, $950,000. g. Completed units were sold on account, $1,500,000. The Cost of Goods Sold was $900,000.

1 a. Work in process—Refining Department 495,000 Work in process—Blending Department 115,000 Raw materials 610,000 2 b. Work in process—Refining Department 72,000 Work in process—Blending Department 18,000 Salaries and wages payable 90,000 3 c. Manufacturing overhead 225,000 Accounts payable 225,000 4 d. Work in process—Refining Department 181,000 Work in process—Blending Department 42,000 Manufacturing overhead 223,000 5 e. Work in process—Blending Department 740,000 Work in process—Refining Department 740,000 6 f. Finished goods 950,000 Work in process—Blending Department 950,000 7 g(1). Accounts receivable 1,500,000 Sales 1,500,000 8 g(2). Cost of goods sold 900,000 Finished goods 900,000

2. Post the journal entries from (1) above to T-accounts. The following account balances existed at the beginning of March. (The beginning balance in the Refining Department's Work in Process is given in the T-account shown above.) Raw materials $ 618,000 Work in process—Blending Department $ 65,000 Finished goods $ 20,000

Accounts Receivable Raw Materials Beg. Bal. Beg. Bal. 618,000 g. 1,500,000 610,000 a. End. Bal. 1,500,000 End. Bal. 8,000 Work in Process—Refining Department Work in Process—Blending Department Beg. Bal. 38,000 Beg. Bal. 65,000 a. 495,000 740,000 e. a. 115,000 950,000 f. b. 72,000 b. 18,000 d. 181,000 d. 42,000 e. 740,000 End. Bal. 46,000 End. Bal. 30,000 Finished Goods Manufacturing Overhead Beg. Bal. 20,000 Beg. Bal. f. 950,000 900,000 g. c. 225,000 223,000 d. End. Bal. 70,000 End. Bal. 2,000 Accounts Payable Salaries and Wages Payable Beg. Bal. Beg. Bal. 225,000 c. 90,000 b. End. Bal. 225,000 End. Bal. 90,000 Sales Cost of Goods Sold Beg. Bal. Beg. Bal. 1,500,000 g. g. 900,000 End. Bal. 1,500,000 End. Bal. 900,000

Calculate the Blending Department's cost of ending work in process inventory for materials, conversion, and in total for June. Calculate the Blending Department's cost of units transferred out to the Bottling Department for materials, conversion, and in total for June.

Assigning costs to units: Materials Conversion Total Ending work in process inventory: Equivalent units 40,000 10,000 Cost per equivalent unit $1.80 $1.55 Cost of ending work in process inventory $72,000 $15,500 $ 87,500 Units completed and transferred out: Units transferred to the next department 160,00 160,000 Cost per equivalent unit $1.80 $1.55 Cost of units completed and transferred out $288,000 $ 248,000 $ 536,000

Prepare a cost reconciliation report for the Blending Department for June.

Cost of beginning work in process inventory ($25,200 + $24,800) = $50,000 Costs added to production during the period ($334,800 + $238,700) = $573,500

2. What were the Mixing Department's cost per equivalent unit for materials and conversion for April? The beginning inventory consisted of the following costs: materials, $67,800; and conversion cost, $30,200. The costs added during the month consisted of: materials, $579,000; and conversion cost, $248,000.

Cost per equivalent unit Materials Conversion Cost of beginning work in process $ 67,800 $ 30,200 Cost added during the period 579,000 248,000 Total cost (a) $ 646,800 $ 278,200 Equivalent units of production (b) 220,000 214,000 Cost per equivalent unit (a) ÷ (b) $ 2.94 $ 1.30

Calculate the Blending Department's cost per equivalent unit for materials and conversion in June.

Cost per equivalent unit: Materials Conversion Cost of beginning work in process $25,200 $24,800 Cost added during the period 334,800 238,700 Total cost (a) $360,000 $263,500 Equivalent units of production (b) 200,000 170,000 Cost per equivalent unit (a) ÷ (b) $ 1.80 $ 1.55

3. How many of the units transferred out of the Mixing Department in April were started and completed during that month?

Total units transferred 190,000 Less units in the beginning inventory 30,000 Units started and completed during April 160,000 Note: This answer assumes that the units in the beginning inventory are completed before any other units are completed.