Question

the Baking Grayson Company produces an industrial chemical used for cleaning and lubricating machinery. In the Mixing Department, liquid and dry chemicals are blended to form slurry. Output is measured in gallons. Department, the slurry is subjected to high heat, and the residue appears in irregular lumps. Output is measured in pounds. In the Grinding Department, the irregular lumps are ground into a powder, and this powder is placed in 50-pound bags. Output measured in bags produced. n April, the company reported the following data: a. The Mixing Department transferred 50,000 gallons to the Baking Department, costing $250,000. Each gallon of slurry weighs two pounds b. The Baking Department transferred 100,000 pounds (irregular lumps) to the Grinding Department. (transferred-in cost of $25,000 plus conversion cost of $10,000). No additional direct materials are added in the Baking Department. At the end of April, there was no ending work tthe beginning of the month, there were 5,000 gallons of slurry process, 25 percent complete, costing $35,000 process. Conversion costs for the month totaled $205,000. Nomal loss during baking is 5 percent of good output. All transferred-in materials are lost, but since loss occurs uniformly throughout the process, only 50 percent the conversion units are be lost assumed c. The Grinding Department transferred 2,500 bags of chemicals to ts finished goods warehouse. Beginning work in process for this department was 25,000 pounds, 40 percent complete with the following costs: bags is torn and must be discarded. No powder is lost (the tearing occurs when the bag is being attached to a funnel), Conversion costs for the month's production are 172.500. There is na ending work in process Required: dollar, if required. 1. Using FIFO, calculate the cost per bag of chemicals transferred to the finished goods warehouse. Round per-unit costs to the nearest cent. Round all other answers to the nearest unit Baking Department (to obtain the cost of goods transferred out) Units to account for: 12,000 X Beginning work in process 102,800 X Units started Total units to account for Units accounted for 102,800 x Units transferred out 5.140 X Normal spoilage Abnormal spoilage Total units accounted for Equivalent Units Transferred Conversion Costs In 104,600 X Total equivalent units Total unit cost Cost of units transferred out: Started and competed Prior period costs Costs to finish Normal spoilage Total Grinding Department: Total units accounted for Note: (For direct materials: 11 bags are used to get 10 good bags). Unit cost of units started and completed: Direct Conversion Transferred Materials Costs Total In Costs added Total equivalent units $ Cost per equivalent unit Unit cost of units from beginning work in process: Prior period costs Costs to finish: Direct materials Conversion costs Total Unit cost per unit A tA 2. Prepare the journal entry needed to remove abnormal spoilage from the Baking department Loss Due to Spoilage Work in Process - Baking

Answer 1

Baking Department Units to account for: Beginning work in process Units started 10,000 100,000 110,000 Total units to account for Units accounted for Units transferred out 100,000 Normal spoilage Abnormal spoilage 5,000 5,000 Total units accounted for 110,000 2 x 50,000. 2 x 5,000 Started and completed: 90,000 (subtracting out beginning work-in-process units.) Equivalent Units Transfrerred In Conversion costs 90,000 Units started and completed Equivalent units in beginning work in process Normal spoilage Abnormal spoilage Total equivalent units 90,000 7.500 0 2,500 5,000 5,000 100,000 2,500 102,500 Unit conversion costs: $205,000/102,500 Unit transferred-in cost: $250,000/100,000 $2.00 2.5 $4,50 Total unit cost Units transferred out: $405,000 Started and completed ($4.50 x 90,000) Units from beginning work in process: Prior-period costs Costs to finish ($2.00 x 7,500) Normal spoilage ($2.00 x 2,500)($2.50 x 5,000) Total $35,000 15,000 50,000 17,500 $472,500 Abnormal spoilage loss ($2.00 x 2,500) ($2.50 x 5,000) $17,500

Grinding Department Physical flow schedule: 500 Units, beginning work in process Units started in April (transferred in) 2,000 2,500 Total units to account for Units completed and transferred out: letad 2,000 500 Started and completed From beginning work in process Total units accounted for 2,500 *Pounds is converted to bags: 25,000/50, 100,000/50 Equivalent units calculation: Conversion Transferred Direct Costs Materials Ir Units started and completed 2,000 2.000 000 Add: Equivalent units in beginning 300 work in process 500 2.000 Total equivalent units 2,500 | 2,300 Unit cost calculation: Costs charged to the department: Conversion Costs 15 000 Direct Transferred Total 147,500 Materials In $132,500 Costs in beginning work in process Costs added Total costs 472,500 $605,000 4,125 $4,125 172,500 649,125 $796,625 $187,500 *1.1 x 2,500 x $1.50 (11 bags are used to get 10 good bags). Unit cost Unit direct materials cost Unit conversion costsUnit transferred-in cost = $4,125/2,500+ $172,500/2,3000+ $472,500/2,000 $1.65 +$75.00$236.25 = S312.90 Units transferred out: Unit cost of units started and completed (2,000 units): $312.90 Unit cost of units from beginning work in process: 312.9 Prior-period costs Costs to finish: Direct materials ($1.65 x 500) Conversion costs ($75 x 300) Total 147500 825 22500 170825 Units 50C Unit cost 341.65 Ques 2 Baking: Loss due to spoilage 17500 Work in process-Baking 17500 There is no abnormal spoilage the Grinding Department.