Question

Cooperative San Jose 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 Total units to be accounted for Units accounted for as follows: Transferred to next department Work in process, April 30 (materials 75% complete; conversion 50% complete) Total units accounted for 7,400 33,000 40,400 noes 28,600 11,800 40,400 Cost Reconciliation Cost to be accounted for! Work in process, April 1 Cost added during the month Total cost to be accounted for Cost accounted for as follows: Work in process, April 30 $ 26,640 119.425 $ 146,065 $ 31,093

Answer 1

1 Materials Conversion 37,450 34,500 Equivalent units of production 2 Materials $2.50 Conversion $1.521 Cost per equivalent unit 3 Units Started and Completed 21,200 working Units competed and transferred out Less: Beginning WIP Inventory Units Started and completed 28,600 7,400 21,200 4 No There is not much savings in material cost as claimed by manager of Mixing Department Raw material price for March month $2.56 $17,020/ (7400*90%) Raw material price for April month $2.50 Working notes: Cooperative San Jose Production Cost Report-Weighted Average Cost Method For the Month of April Equivalent Units Whole % Direct % Conversion Flow of units Units Completed Materials Completed Costs Units to account for: Beginning WIP Inventory 7,400 Units started during the month 33,000 Total Units to account for Units accounted for: Units competed and transferred out 28,600 100% 28,600 100% 28,600 Units in Ending WIP Inventory 75% 8,850 50% 5,900 Total Units accounted for 40,400 Equivalent units of production 37,450 34,500 40,400 11,800 COSTS Direct Materials Conversion Costs Total Costs Costs to account for: Cost from Beginning WIP Inventory Cost added during period Total cost to account for $17,020 $76,605 $93,625 $9,6201 $42,820 $52,440 $26,640 $119,425 $146,065 Divided by Equivalent units Cost per Equivalent unit 37,450 $2.50 34,5001 $1.52 $4.02