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Chapter 18: Q22E (page 1012)

Refer to your answers from Exercise E18-21.

Requirements

1. Prepare the journal entries to record the assignment of direct materials and direct labor and the allocation of manufacturing overhead to the Blending Department. Also, prepare the journal entry to record the costs of the gallons completed and transferred out to the Packaging Department. Assume labor costs are accrued and not yet paid.

2. Post the journal entries to the Work-in-Process Inventory—Blending T-account.

What is the ending balance?

3. What is the average cost per gallon transferred out of the Blending Department

into the Packaging Department? Why would the company managers want to

know this cost?

Short Answer

Expert verified

1.The journal entries to record the assignment of the direct material costing $5,525 and direct labor of $1,500, allocation of manufacturing overhead of $2,547 and the cost of completed and transferred out gallon i.e. $7,930 is done in step 2.

2. The ending balance of the work-in-process inventory account is $1,642

3. The average cost per gallon transferred out of the blending department into the packaging department is $1.22

The management of the company compute this cost to decide the selling price of the product after adding the profit margin.

Step by step solution

01

Step-by-Step Solution:Step 1: Costing system

A costing system is defined as the system used by the companies to determine the cost of goods manufactured during the year. It is classified as the process and job order costing systems.

02

Journal entries

Date

Particulars

Debit ($)

Credit ($)

Work-in-process inventory

5,525

Direct material

5,525

Work-in-process inventory

1,500

Wages payable

1,500

Work-in-process inventory

2,547

Manufacturing overhead

2,547

Finished goods inventory

7,930

Work-in-process inventory

7,930

03

Work-in-process inventory – Blending T-account

Particulars

Amount ($)

Particulars

Amount ($)

Beginning balance

0

Finished goods inventory

7,930

Direct material

5,525

Direct labor

1,500

Manufacturing overhead

2,547

Ending balance

1,642

04

Average cost per gallon transferred out of the blending department into the packaging department

Averagecostpergallon=TotalcostofthecompletedgoodsNumberofunits=$7,9306,500=$1.22​

The manager of Shea Winery want to know this cost for deciding the selling price of the product. Selling price is derived at by adding the profit margin with the total cost of the products.

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Most popular questions from this chapter

Question: What types of companies use process costing systems?

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.

PepsiCo, Inc. is a global food and beverage company that manufactures brands such as Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. One of the products PepsiCo, Inc. manufactures is Mountain Dew. The first process in manufacturing Mountain Dew consists of clarifying the water to remove impurities such as organic materials and bacteria. The clarification process involves mixing the water with aluminum sulfate (an indirect material) to remove the impurities.

Assume PepsiCo uses the weightedaverage method of process costing.

Requirements

1. During the month of June, the Clarification Department incurred the following costs in processing 100,000 liters:

Wages of workers operating the clarification equipment

$20,000

Manufacturing overhead allocated to clarification

24,000

Water

160,000

PepsiCo had no beginning Work-In-Process Inventory in the Clarification Department in June. Compute the June conversion costs in the Clarification Department.

2. Assume that water is added at the beginning of the clarification process and conversion costs are added evenly throughout the process. The Clarification Department completed and transferred out 60,000 liters during June. The 40,000 liters remaining in Clarification’s ending Work-in-Process Inventory were 100% complete for direct materials and 60% complete for conversion costs. Compute the equivalent units of production for direct materials and conversion costs for the Clarification Department.

3. Compute the cost per equivalent unit for direct materials and conversion costs for the Clarification Department.

Question: Refer to the data in Short Exercise S18-8 and your results for equivalent units of production. The Mixing Department of Complete Foods has direct materials costs of \(46,500 and conversion costs of \)23,540 for October.

Compute the cost per equivalent unit of production for direct materials and for

conversion costs.

Question: Department 4 has completed production on units that have a total cost of $15,000. The units are ready for sale. Give the journal entry.
See all solutions

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