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Chapter 18: Q.18-15SE (page 1009)

Question: Spring Fresh produces premium bottled water. Spring Fresh purchases artesian water, stores the water in large tanks, and then runs the water through two processes: filtration and bottling.

During February, the filtration process incurred the following costs in processing

200,000 liters:

Wages of workers operating filtration equipment

$34,950

Manufacturing overhead allocated to filtration

19,050

Water

110,000

Spring Fresh had no beginning Work-in-Process Inventory in the Filtration Department in February.

Requirements

1. Use the FIFO method to compute the February conversion costs in the Filtration Department.

2. The Filtration Department completely processed 200,000 liters in February. Use

the FIFO method to determine the filtration cost per liter.

Short Answer

Expert verified

Answer:

1. The February conversion cost in the filtration department is $54,000

2. The filtration cost per liter in February is $0.27 per liter.

Step by step solution

01

Conversion cost in the filtration department

Conversioncost=Directlabourcost+manufacturingoverhead=$34,950+$19,050=$54,000

02

Filtration cost per liter

Filtrationcostperliter=ConversioncostEqualentcompletedunits=$54,000200.000=$0.27

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Most popular questions from this chapter

Cheerful Colors manufactures crayons in a three-step process: mixing, molding, and packaging. The Mixing Department combines the direct materials of paraffin wax and pigments. The heated mixture is pumped to the Molding Department, where it is poured into molds. After the molds cool, the crayons are removed from the molds and are transferred to the Packaging Department, where paper wrappers are added and the crayons are boxed.

In the Mixing Department, the direct materials are added at the beginning of the

process and the conversion costs are incurred evenly throughout the process. Work in process of the Mixing Department on March 1, 2018, consisted of 800 batches of crayons that were 10% of the way through the production process. The beginning balance in Work-in-Process Inventory—Mixing was \(32,800, which consisted of \)14,000 in direct materials costs and $18,800 in conversion costs. During March, 5,200 batches were started in production. The Mixing Department transferred 3,000 batches to the Molding Department in March, and 3,000 were still in process on March 31. This ending inventory was 80% of the way through the mixing process. Cheerful Colors uses FIFO process costing.

At March 31, before recording the transfer of costs from the Mixing Department

to the Molding Department, the Cheerful Colors general ledger included the following account:

Work-in-process inventory – Mixing

Balance, March 1

32,800

Direct materials

42,000

Direct labor

24,610

Manufacturing overhead

65,830

Requirements

1. Prepare a production cost report for the Mixing Department for March. Round

equivalent unit of production costs to four decimal places. Round all other costs to the nearest whole dollar.

2. Journalize all transactions affecting the Mixing Department during March, including the entries that have already been posted. Assume labor costs are accrued and not yet paid.

Oxford Company had the following transactions in October:

1. Purchased raw materials on account, \(70,000

2. Used materials in production: \)26,000 in the Mixing Department; \(14,000 in the

Packaging Department; \)1,000 in indirect materials

3. Incurred labor costs: \(8,000 in the Mixing Department; \)7,200 in the Packaging

Department; \(2,200 in indirect labor

4. Incurred manufacturing overhead costs: \)3,500 in machinery depreciation; paid

\(2,300 for rent and \)1,590 for utilities

Prepare the journal entries for Oxford Company.

Describe how the FIFO method is different from the weighted-average method.

Preparing a production cost report, second department, withbeginning WIP and transferred in costs; journal entries; FIFO method Work Problem P18-40B using the FIFO method. The Mixing Department beginningwork in process of 400 units is 80% complete as to both direct materials and conversion costs. Round equivalent unit costs to four decimal places. Round all other costs to the nearest dollar.

Smith Paper Co. produces the paper used by wallpaper manufacturers. Smith’s four-stage process includes mixing, cooking, rolling, and cutting. On March 1, the Mixing Department had 400 rolls in process. During March, the Mixing Department completed the mixing process for those 400 rolls and also started and completed the mixing process for an additional 4,100 rolls of paper. The department started but did not finish the mixing process for an additional 500 rolls, which were 20% complete with respect to both direct materials and conversion work at the end of March. Direct materials and conversion costs are incurred evenly throughout the mixing process. The Mixing Department compiled the following data for March:

Direct materials

Direct labor

Manufacturing overhead allocated

Total costs

Beginning inventory, Mar. 1

\(475

\)275

\(300

\)1,050

Costs added during March

5,045

2,900

2,965

10,910

Total costs

\(5,520

\)3,175

\(3,265

\)11,960

Requirements

1. Prepare a production cost report for the Mixing Department for March. The company uses the weighted-average method.

2. Journalize all transactions affecting the company’s mixing process during March. Assume labor costs are accrued and not yet paid.
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