Question

Old Country Links, Inc., produces sausages in three production departments - Mixing, Casing and Curing, and Packaging. In the Mixing Department, meats are prepared and ground and then mixed with spices. The spiced meat mixture is then transferred to the Casing and Curing Department, where the mixture is force-fed into casings and then hung and cured in climate controlled smoking chambers. In the Packaging Department, the cured sausages are sorted, packed, and labeled. The company uses the weighted average method in its process costing system. Data for September for the Casing and Curing Department follow Work in process inventory, September 1 Work in process Inventory, September 30 Units Mixing 7 100% 7 100% Percent completed Materials Conversion 60% SOX 20% 10x Work in process Inventory, September 1 Cost added during September Mixing Materials Conversion $ 13,006 112 $ 4,193 $ 128,404 511,852 $ 110,310 Mixing cost represents the costs of the spiced meat mixture transferred in from the Mixing Department. The spiced meat mixture is processed in the Casing and Curing Department in batches, each unit in the above table is a batch and one batch of spiced meat mixture produces a set amount of sausages that are passed on to the Packaging Department. During September, 72 batches (Le.. units) were completed and transferred to the Packaging Department Required: 1. Determine the Casing and Curing Department's equivalent units of production for mixing materials, and conversion for the month of

Answer 1

1) Under weighted average method, equivalent units are to be calculated only for units completed & transferred out and units lying as ending work in process as it is assumed that the units once entered into the process become integral part of total units and no segregation between units transferred from beginning work in process and introduced during current process. Conversion cost includes Labor + Overheads. So,% of completion of beginning Work in Process Inventory doesn't affect the calculation of equivalent units of production. Physical % work done EUP % work done EUP % work done EUP- Particulars Units Mixing Mixing Materials Materials Conversion Conversion Completed and transferred 72 100% 72 100% 72 100% 72 (72 units x 100%; 72 units x 100%; 72 units x 100%] Ending work in process 100% 7.0 20% 1.4 10% 0.7 [7 units x 100%; 7 units x 20%; 7 units x 10%] Equivalent Units of Production (EUP) 79 73.4 72.7 NOTE: As mixing process is done at the beginning of the process itself, % of work done for 'mixing' in the EUP calculation for ending work in process is 100%. 7 79.0 2) Cost per equivalent units of production Cost of beginning work in process Cost added during the period Total Costs to Account For Divided by Equivalent units of Production (EUP) Cost per Equivalent Unit Mixing $13,006 $128,404 $141,410 79.0 $1,790 Materials $112 $11,852 $11,964 73.4 $ 163 Conversion $4,193 $110,310 $114,503 72.7 [As computed EUP schedule presented above] $1,575 ($141410 / 79 units = $1790; $11964 / 73.4 units = $163; $114503 / 72.7 units = $1575]

3) Cost of ending work in process Mixing Materials Conversion Total Cost Accounted For Ending Work in Process Totals $12,530 [7.0 units x $1790] $228 [1.4 units x $163] $1,103 0.7 units x $1575.00] $13,861 4) Cost of goods completed Mixing Materials Conversion Total Cost Accounted For Units Completed and Transferred Totals $128,880 72.0 units x $1790] $11,736 [72.0 units x $163] $113,400 72.0 units x $1575] $254,016 5) Casing and Curing Department Cost Reconciliation Costs to be accounted for: Beginning work in process Costs added during the month Total costs to be accounted for Costs to account for: Cost of goods completed and transferred Cost of ending work in process Total costs accounted for $17,311 ($13006 + $112 + $4193] $250,566 ($128404 + $11852 + $110310] $267,877 $254,016 $13,861 $267,877