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Chapter 18: Q24E (page 1013)

Refer to the data and your answers from Exercise E18-23.

Requirements

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

2. Post the journal entries to the Work-in-Process Inventory—Fermenting T-account. What is the ending balance?

3. What is the average cost per gallon transferred out of the Fermenting Department into the Packaging Department? Why would Shea Winery’s managers want to know this cost?

Short Answer

Expert verified

1.The journal entries record the assignment of the direct material costing $9,288 and direct labor of $3,305, allocation of manufacturing overhead of $3,378, and the cost of completed and transferred out gallon, i.e., $14,852 is done in step 2.

2. The ending balance of the work-in-process inventory account is $2,064.

3. The average cost per gallon transferred out of the fermenting department into the packaging department is $1.88.

The company’s management 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: Work-in-process Inventory

Work-in-process inventory means the inventory which is partially completed through the process at the end of the reporting period. It is classified as the current assets on the balance sheet.

02

Journal entries

Date

Particulars

Debit ($)

Credit ($)

Work-in-process inventory

9,288

Direct material

9,288

Work-in-process inventory

3,305

Wages payable

3,305

Work-in-process inventory

3,378

Manufacturing overhead

3,378

Finished goods inventory

14,852

Work-in-process inventory

14,852

03

Work-in-process inventory – Fermenting T-account

Particulars

Amount ($)

Particulars

Amount ($)

Beginning balance:

Finished goods inventory

14,852

  • Direct materials

540

  • Direct labor

195

  • Manufacturing overhead

210

Cost added during March

Direct material

9,288

Direct labor

3,305

Manufacturing overhead

3,378

Ending balance

2,064

04

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

Averagecostpergallon=TotalcostofthecompletedgoodsNumberofunits=$14,8527,900=$1.88​

The manager of Shea Winery wants to know this cost to decide the product's selling price. The selling price is above the total cost of the product.

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Most popular questions from this chapter

Refer to Short Exercise S18A-15. At Spring Fresh, water is added at the beginning of the filtration process. Conversion costs are added evenly throughout the process. Now assume that in February, 130,000 liters were completed and transferred out of the Filtration Department into the Bottling Department. The 70,000 liters remaining in Filtration’s ending Work-in-Process Inventory were 80% of the way through the filtration process. Recall that Spring Fresh has no beginning inventories.

Compute the equivalent units of production for direct materials and conversion

costs for the Filtration Department using the FIFO method.

Complete the missing amounts in the following production report. Materials are added at the beginning of the process; conversion costs are incurred evenly; the ending inventory is 60% complete. The company uses the weighted-average method.

NATHAN COMPANY

Production Cost Report – Finishing Department

Month Ended September 30, 2018

Units


Physical units
Equivalent Units
Direct materials
Conversion costs

Units to account for:

  • Beginning work-in-process

500

  • Started in production

2,200

Total units to account for

(a)

Units accounted for:

  • Completed and transferred out

(b)

(d)

(g)

  • Ending work-in-process

500

(e )

(h)

Total units accounted for

(c)

(f)

(i)

COSTS

Direct materials

Conversion costs

Total costs

Cost to account for:

  • Beginning work-in-process

\(1,200

(j)

\)2,140

  • Cost added during period

12,030

8,310

(k)

Total costs to account for

(l)

9,250

22,480

Divided by: Total EUP

(m)

(n)

Cost per equivalent unit

(o)

(p)

Costs accounted for:

  • Completed and transferred out

(q)

(r)

(s)

  • Ending work-in-process

(t)

(u)

(v)

Total cost accounted for

(w)

(x)

$22,480

Sea Worthy uses three processes to manufacture lifts for personal watercrafts: forming a lift’s parts from galvanized steel, assembling the lift, and testing the completed lift. The lifts are transferred to finished goods before shipment to marinas across the country. Sea Worthy’s Testing Department requires no direct materials. Conversion costs are incurred evenly throughout the testing process. Other information follows for October 2018:

UNITS

Beginning work-in-process inventory

2,300 units

Transferred in from assembling department during the period

6,800 units

Completed during the period

4,100 units

Ending work in process inventory (40% complete for conversion work)

5,000 units

COSTS

Beginning work in process inventory (transferred in costs, \(93,400, conversion costs, \)18,100)

$111,500

Transferred in from the assembly department during the period

671,000

Conversion cost added during the period

49,000

The cost transferred into Finished Goods Inventory is the cost of the lifts transferred out of the Testing Department. Sea Worthy uses weighted-average process costing.

Requirements

1. Prepare a production cost report for the Testing Department.

2. What is the cost per unit for lifts completed and transferred out to Finished Goods Inventory? Why would management be interested in this cost?

Mayhem Electronics makes game consoles in three processes: assembly, programming, and packaging. Direct materials are added at the beginning of the assembly process. Conversion costs are incurred evenly throughout the process. The Assembly Department had no Work-in-Process Inventory on March 31. In mid-April, Mayhem Electronics started production on 99,000 game consoles. Of this number, 95,000 game consoles were assembled during April and transferred out to the Programming Department. The April 30 Work-in-Process Inventory in the Assembly Department was 45% of the way through the assembly process. Direct materials costing \(301,950 were placed in production in Assembly during April, direct labor of \)100,960 was assigned, and manufacturing overhead of $136,200 was allocated to that department.

Requirements

1. Prepare a production cost report for the Assembly Department for April. The

company uses the weighted-average method.

2. Prepare a T-account for Work-in-Process Inventory—Assembly to show its activity during April, including the April 30 balance.

Describe some ways managers use production cost reports to make business decisions.
See all solutions

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