Question

Cooperative San José of southern Sonora state in Mexico makes a unique syrup using cane sugar and local herbs. The syrup is sold in small bottles and is prized as a flavoring for drinks and for use in desserts The bottles are sold for $12 each. The first stage in the production process is carried out in the Mixing Department, which removes foreign matter from the raw materials and mixes them in the proper proportions in large vats. The company uses the weighted-average method in its process costing system. A hastily prepared report for the Mixing Department for April appears below: Units to be accounted for Work in process, April 1 (materials 90% complete: conversion 80% complete) Started into production 6,700 35,100 Total units to be accounted for 41,800 Units accounted for as follows 34,800 7.000 41,800 Transferred to next department Work in process, April 30 (materials 75% complete: conversion 50% complete) Total units accounted for Cost Reconciliation Cost to be accounted for Work in process, April 1 Cost added during the month $ 23,182 129,832 Total cost to be accounted for $153,014 Cost accounted for as follows Work in process, April 30 Transferred to next department $ 17,990 135,024 Total cost accounted for $153,014 Management would like some additional information about Cooperative San José's operations

Answer 1

Using weighted average cost method:

1)

	Material	conversion
Equivalent unit of production	40050	38300

Explanation:

Beginning units	6700	transferred out	34800
Started into production	35100	ending units	7000
	41800		41800

Equivalent units	material	conversion cost
Units transferred (A)	34800	34800
Ending units	7000	7000
Completion	75%	50%
(B)	5250	3500
Total units ( A + B)	40050	38300

2)

	Material	conversion
Cost per equivalent unit	$2.52	$1.36

Explanation:

Particular	material	conversion	total
As at beginning	$15544	$7638	$23182
Added during the month	$85382	$44450	$129832
Cost to be accounted for	$100926	$52088	$153014
Total equivalent units	40050	38300
Cost per equivalent units	$2.52	$1.36

Cost per equivalent unit = cost to be accounted for/ total equivalent units

3)

Out of the units transferred to the next department, 28100 units (34800-6700) were started and completed during the month.

4)

No, the manager should not be rewarded. In weighted average method, the cost of prior period gets mixed with the current period cost. Thus if cost in march in march is $2.1 and in april it is $2.6. then the cost will be less than $2.60 under weighted average method

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