Question

700 gallons 8,500 gallons 7,700 gallons 1,500 gallons Gallons Beginning Work-in-Process Inventory Started in production Completed and transferred out to Packaging in March Ending Work-in-Process Inventory (80% of the way through the fermenting process) Costs Beginning Work-in-Process Inventory: Direct materials Direct labor Manufacturing overhead allocated Costs added during March: Direct materials $ 2,140 200 190 9,360 Direct labor 1,340 Manufacturing overhead allocated 4,500 $ 15,200 Total costs added during March Total Costs 2,530 15,200 Johnson Winery Production Cost Report - Fermenting Department (Partial) Month Ended March 31 Direct Conversion COSTS Materials Costs Costs to account for: Beginning work-in-process 2,140 $ 390 $ Costs added during the period 9,360 5,840 Total costs to account for 11,500 $ 6,230 $ 9,200 8.900 Divided by: Total equivalent units of production $ 1.25 $ 0.70 Cost per equivalent unit Costs accounted for: Completed and transferred out 9,625 $ 5,390 $ Ending work-in-process 1,875 $ 11,500 $ 6,230 $ Total costs accounted for 17,730 $ 840 15,015 2,715 17,730

Answer 1

1.

Date	Accounts	Debit	Credit
Mar.31	Work in process inventory - Fermenting	$15,200
	Raw material inventory		$9,360
	Wages payable		1,340
	Manufacturing overhead		4,500

2.

Date	Accounts	Debit	Credit
Mar.31	Work in process inventory - Packaging	$15,015
	Work in process inventory - Fermenting		$15,015

3.

Work in process inventory-Fermenting
Beg.Bal.	$2,530	$15,015	Work in process - Packaging
Raw material inventory	9,360
Wages payable	1,340
Manufacturing overhead	4,500
End.Bal.	$2,715

4.

Average cost per gallon transferred out is $1.95 ($15,015/7,700) per gallon

5.

Managers would compare average cost per gallon against their budgeted cost to determine whether the cost of the blending process remains under control. if budgeted cost are higher than the actual average cost per gallon then the managers have done good job controlling costs. In contrast if budgeted cost are lower than the actual average cost per gallon, managers will investigate the reason for the higher than expected costs in an effort to regain control over costs.