Question

Mastery Problem: Process Cost Systems

Grainy Goodness Company

Grainy Goodness Company manufactures granola cereal by a series of three processes, beginning materials such as oats, sweeteners, and nuts being introduced in the Mixing Department. From the Mixing Department, the materials pass through the Baking and Packaging departments, emerging as boxed granola cereal ready for shipment to retail outlets. Direct materials are added at the beginning of each process, and conversion costs are incurred evenly throughout production in each department.

During March, the President and sole stockholder, Jonathan Groat, reviewed the Cost of Production Report for the Mixing Department. He is concerned that the Mixing Department may not be operating efficiently, and asks for your help.

Cost of Production

Jonathan has noticed that his production manager has omitted some of the data on the Cost of Production. Determine the missing information. If there is no amount or an amount is zero, enter "0". Round your per-unit computations to the nearest cent, if required.

Grainy Goodness Company
Cost of Production Report-Mixing Department
For the Month Ended March 31
Unit Information
Units charged to production:
Inventory in process, March 1			2,000
Received from materials storeroom			38,000
Total units accounted for by the Mixing Department			40,000
Units to be assigned costs:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, March 1 (40% completed)	2,000
Started and completed in March	35,000	35,000	35,000
Transferred to Baking Department in March	37,000
Inventory in process, March 31 (80% completed)	3,000
Total units to be assigned costs	40,000
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for March in Mixing Department		$40,660	$36,670
Total equivalent units		÷	÷
Cost per equivalent unit		$	$
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, March 1	$2,200	$600	$2,800
Costs incurred in March			77,330
Total costs accounted for by the Mixing Department			$80,130
Cost allocated to completed and partially completed units:
Inventory in process, March 1-balance			$2,800
To complete inventory in process, March 1		1,140	1,140
Cost of completed March 1 work in process			$3,940
Started and completed in March	37,450	33,250	70,700
Transferred to Baking Department in March			$
Inventory in process, March 31	3,210	2,280
Total costs assigned by the Mixing Department			$

February Cost Analysis

Determine the cost per unit of direct materials and for conversion for the month of February using the completed data on the Cost of Production. Round your per-unit computations to the nearest cent, if required.

Cost Analysis for February - Mixing Department
	Amount	Equivalent Units	Cost per Unit
Direct Materials in inventory in process, March 1	$		$
Conversion costs in inventory in process, March 1
		Total cost per unit	$

March Cost Analysis

Determine the cost per unit of direct materials and for conversion for the month of March using the completed data on the Cost of Production. Round your per-unit computations to the nearest cent, if required.

Cost Analysis for March- Mixing Department
	Amount	Equivalent Units	Cost per Unit
Costs for March: Direct Materials	$		$
Costs for March: Conversion
		Total cost per unit	$

Mixing Dept. Evaluation

After reviewing your work on the February Cost Analysis and March Cost Analysis, assist Jonathan Groat in evaluating the Mixing Department’s performance by answering the following questions:

In March, was the Mixing Department’s total cost per unit higher or lower than in February?

For which component was the cost per unit for March higher than in February?

What is most probably your recommendation to Jonathan Groat given your computations?

Journal

On March 31, using the data provided on the Cost of Production, journalize the entry to move the appropriate amount of cost from the Mixing Department to the Baking Department. If an amount box does not require an entry, leave it blank.

Mar. 31

Answer 1

Answer is given below

Grainy Goodness Company Cost of Production Report-Mixing Department For the Month Ended March 31 Unit Information Inventory in process, March 1 Received from materials storeroom Total units accounted for by the Mixing Department Units to be assigned cost 2,000 38,000 40,000 Physical Units Equivalent Units % Direct % Conversion Completed Materials Completed Cost 60% 100% 1,200 35,000 100% 35,000 Analysis of Physical Flow of Units Units to be accounted for Inventory in process, March 1 (40% completed) Started and completed in March Transferred to Baking Department in March inventory in process, March 31 (80% completed) Total Units Accounted for Total Equivalent units 2,000 35,000 37,000 3,000 40,000 100% 3,000 80% 2,400 38,600 38,000 Total Costs $77,330 Total costs for March in Mixing Department Total equivalent units Cost per equivalent unit Direct Conversion Materials Cost $40,660 $36,670 38,000 38,600 $1.07 $0.95 Direct Conversion Materials Cost $2,200 $600 $40,660 $36,670 $42,860 $37,270 $2.02 Total Costs $2,800 $77,330 $80,130 Inventory in process, March 1 Costs incurred in March Total costs accounted for by the Mixing Department $2,200 Cost allocated to completed and partially completed units: Inventory in process, March 1-balance To complete inventory in process, March 1 Cost of completed March 1 work in process Started and completed in March Transferred to Baking Department in March $2,200 $37,450 $39,650 $600 $1,140 $1,740 $33,250 $34,990 $2,800 $1,140 $3,940 $70,700 $74,640 A Inventory in process, March 31 Total costs assigned by the Mixing Department $3,210 $42,860 $2,280 $37,270 $5,490 B $80,130 A+B Cost Analysis for February - Mixing Department Direct Materials in inventory in process, March 1 Conversion costs in inventory in process, March 1 Equivalent Cost per Amount Units Unit $2,200 2,000 $1.10 $600 8000 $0.75 Total cost per unit $1.85 Cost Analysis for March-Mixing Department Costs for March: Direct Materials Costs for March: Conversion Amount Equivalent Cost per Units Unit $40,660 38,000 $1.07 $36,670 38,600 $0.95 Total cost per unit $2.02 In March, was the Mixing Department's total cost per unit higher or lower than in February? Total cost per unit was higher For which component was the cost per unit for March higher than in February? Conversion cost was higher What is most probably your recommendation to Jonathan Groat given your computations? Jonathan should look into the conversion cost break up - Labor and Overheads charged to production Labor rate and overhead rate needs to be analysed to understand the movement in rate and control cost Credit Debit $74,640 Date Account Title and explanation March 31 Work in process- Baking Department To Work in process - Mixing Department (To record transfer from Mixing Department to Baking Department) $74,640