Question

Benoit Chemical Company (BCC) produces a variety of specialty chemicals used in the pharmaceutical industry and construction industry. BCC spends almost 20% of its net revenues on research, product development, and customer development to achieve its reputation as a high-quality producer of chemicals, a reliable supplier, and a great provider of customer service. BCC has small number of large customers, each of which typically has one or more large orders being processed at BCC at any given point in time. These orders are typically completed over 1 to 3 months or longer. BCC uses job costing to keep track of total job costs over the duration of each order and process costing to keep track of monthly costs, department by department. The processing departments include mixing, reacting (in which chemicals are heated and sometimes vacuum is applied), cleaning, inspecting, and packaging. Much of the total product cost is accumulated in the first two processes, mixing and reacting. The following information is for activity and costs in the first two departments during the current month. The mixing department started 62,000 gallons this month. No spoilage is measured in the mixing department, but a careful measurement of the loss of material in reacting is taken after the completion of the reacting process. No materials are added in the reacting process. The number of gallons lost (spoilage) is considered normal spoilage and none of the costs of the spoiled units can be recovered. BCC uses the weighted-average method for process costing. Percentage completion for conversion costs is 60% in the mixing department for both beginning and ending inventory. The percentage completion for conversion costs for the reacting department for beginning and ending inventory is 30% and 40%, respectively. Work-in-Process for the two departments is as follows. Beginning work-in-process units Ending work-in-process units Normal spoilage (lost gallons) Mixing Department (gallons) 40,000 17,500 0 Reacting Department (gallons) 16,000 7, 800 2, 300 Costs in the mixing department: Beginning work-in-process Current costs Materials $ 56, 720 288, 604 Conversion $ 282, 400 989, 346

Answer 1

Solution:

Benoit Chemical Company Production Cost Report Mixing Department Weighted Average Equivalent Units Completion Percentage Direct Materials Conversion Physical Units 40000 Beg WIP Direct Materials Conversion Units started (lbs) Total to account for 100% 60% % 62000 102000 100% 84500 84500 84500 17500 17500 Units finished or transferred out Ending WIP Direct Materials Conversion Total accounted for Total Equivalent Units 100% 60% 10500 102000 102000 95000 Total Beg WIP Current Costs Total Divide by Equivalent Units WTAVG Cost per EU 339120 Units Cost Determination Direct Materials Conversion Cost 56720 282400 288604 989346 345324 1271746 1277950 1617070 95000 102000 3.386 13.387 16.772 Gallons Cost Assignment Units Completed and Units in Ending Transferred out WIP 1417262 Total 1417262 84500 Finished Goods Ending WIP Direct Materials Conversion Total Manufacturing Costs accounted for 17500 59247 59247 10500 140561 140561 1617070

Weighted Average Benoit Chemical Company Production Cost Report Reacting Department Completion Physical Units Percentage 16000 0% 30% Trans - In Cost Direct Materials Conversion Beg WIP Direct Materials Conversion Units started Total to account for 84500 100500 90400 90400 0 90400 100% 100% 2300 0 2300 2300 7800 Units finished Normal Spoilage Ending WIP Direct Materials Conversion Total accounted for Total Equivalent Units 7800 0 0% 40% 3120 100500 100500 0 95820 Total 654861 Beg WIP Current Costs Total Divide by Equivalent Units WTAVG Cost per EU Units Cost Determination Trans-In Direct Materials Conversion Cost 242231 0 412630 1417262 0 989346 1659493 0 1401976 100500 0 95820 16.512 0.000 14.631 2406608 3061469 31.144) Cost Assignment Units Gallons Completed and Units in Ending Transferred out WIP 904001 2815392 Total 2815392 2300 71631 71631 7800 Finished Goods Normal Spoilage Ending WIP Trans-In (7800*16.512) Direct Materials Conversion (3120*14.631) Total Manufacturing Costs accounted for 128796 128796 0 45650 0 45650 3061469

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