Question

Litres:
Beginning work in process inventory	2,800	litres
Started production	4,620	litres
Completed and transferred out to Packaging in March	6,420	litres
Ending work in process inventory (80% of the way through
the fermenting process)	1,000	litres
Costs:
Beginning work in process inventory ($2,200 of direct
materials and $1,462 of conversion cost)	$3,662
Costs added during March:
Direct materials	10,414
Direct labour	950
Manufacturing overhead	1,920
Total costs added during March	$13,284

1.	Fill in the time line for the Fermenting Department.
2.	Summarize the flow of physical units and compute the total equivalent units.
3.	Summarize total costs to account for and compute the cost per equivalent unit for direct materials and conversion costs.
4.	Assign total costs to units​ (litres):
	a. Completed and transferred out to the Packaging Department b. In the Fermenting Department ending work in process inventory
5.	What is the average cost per litre transferred out of Fermenting into​ packaging? Why would JohnsonJohnson ​Vineyard's managers want to know this​ cost?

Requirement 1. Fill in the time line for the Fermenting Department.

Start						100%	Complete		Complete
Transferred out to Packaging

Requirement 2. Summarize the flow of physical units and compute the total equivalent units.

Johnson Vineyards
Fermenting Department
Flow of Physical Units and Computation of Equivalent Units
	Flow of	Equivalent Units
	Physical	Direct	Conversion
Flow of Production	Units	Materials	Costs
Units to account for:
Units accounted for:
Total equivalent units

Requirement 3. Summarize total costs to account for and compute the cost per equivalent unit for direct materials and conversion costs. ​(Round the cost per equivalent unit to the nearest​ cent.)

Johnson Vineyards
Fermenting Department
Cost per Equivalent Unit
	Direct	Conversion
	Materials	Costs	Total
Cost per equivalent unit

Requirement 4. Assign total costs to units​ (litres):

Now we can calculate the total cost of the units for a. completed and transferred out to the Packaging Department and b. the Fermenting Department ending work in process. ​(Enter quantities​ first, then the cost per equivalent unit amounts in the same order as calculated in the preceding step. Round your answers to the nearest​ cent.)

Johnson Vineyards
Fermenting Department
Assignment of Costs
	Assign costs:	Direct Materials			Conversion Costs				Total
a.			x (		+		)
b.
			x
							x
	Total cost accounted for

Requirement 5. What is the average cost per litre transferred out of Fermenting into​ Packaging? Why would Johnson ​Vineyard's managers want to know this​ cost?

First identify the labels to compute the average cost per litre transferred​ out, then compute the average cost per unit. ​(Round your answer to the nearest​ cent.)

				Avg. cost
	/		=	per litre

/

=

Why would Johnson ​Vineyard's managers want to know this​ cost?

Managers will want to know this cost to compare it to their .................budgeted target costs cost per equivalent unit direct material costs . They may also use the cost information when ..................

.

Answer 1

1to 4) Production report of Fermenting Department for the month March:
(no % completion is provided, so weighted average costing method is adopted)
	Phy units	Material	Conversion costs	Total
Open WIP	2800	2800	2800
Started and completed	3620	3620	3620
Transferred out to packing	6420
Close WIP	1000	1000	800 (80%)
Equivalent units		7420	7220
Total Costs:
Open WIP		2200	1462
Incurred during month		10414	2870
Total Costs to Acct for:		12614	4332	16946
Cost per Eq unit		1.7	0.6
Cost of Transferred out		6420*1.70=10914	6420*0.60=3852	14766
Cost of Close WIP		1000*1.7=1700	800*0.60=480	2180
Total Costs acctd for:				16946

5) Average cost per lit. transferred out = Total cost transferred out/Total quantity transferred out

= 14766/6420 = $2.30/liter

Managers will want to know this cost to compare it to their Production budgeted target costs cost per equivalent unit direct material costs . They may also use the cost information when to know the material cost comparison between two periods.