Question

Organic Dairy produces an organic butter that is sold by the pound. The production of the butter begins in the Churning Department.

Units in beginning Work in Process (WIP) inventory	75,000 units
Units started during the month (all direct materials, including cream
and salt, are added at the beginning of the churning process)	1,800,000 units
Units in ending Work in Process (WIP) inventory (50% of the way
through the process)	210,000 units
Cost information is as follows:
WIP - Churning Department balance as of January 1:
Direct material cost included in beginning WIP balance	292,500
Conversion cost included in beginning WIP balance	98,600
Beginning balance, WIP, January 1	$391,100
Manufacturing costs incurred during January:
Direct materials used	$1,770,000
Direct labor	9,000
Manufacturing overhead	565,000
Total manufacturing costs entered into production during January	$2,344,000

Requirement 1. Prepare a production cost report for

JanuaryJanuary

for the Churning Department.

Prepare a production cost report for the Churning​ Department, one section at a time. ​(For entries with a​ $0 balance, make sure to enter​ "0" in the appropriate​ cell(s). Round cost per equivalent unit amounts to the nearest​ cent, $X.XX.)

Organic Dairy Churning Department
Month Ended January 31
Production Cost Report
	Flow of	Equivalent Units
	Physical	Direct	Conversion
Flow of Production	Units	Materials	Costs
Units to account for:
Beginning work in process, January 1	75000
Plus: Started in production during January	1800000
Total physical units to account for	1875000
Units accounted for:
Completed and transferred out	210000
Plus: Ending work in process, January 31
Total physical units accounted for
Total equivalent units

	Direct	Conversion
Total Costs to Account for and Cost per Equivalent Unit	Materials	Costs
Beginning work in process
Plus: Costs added during January
Total costs to account for
Divided by: Total equivalent units
Cost per equivalent unit

		Direct	Conversion
	Assignment of total costs:	Materials	Costs	Total
	Completed and transferred out:
	Equivalent units completed and transferred out
	Multiplied by: Cost per equivalent unit
	Costs assigned to units completed and transferred out

	Ending work in process:
	Equivalent units in ending work in process, January 31
	Multiplied by: Cost per equivalent unit
	Costs assigned to units in ending work in process, January 31
	Total costs accounted for

Requirement 2. How much did it cost to make one pound of butter in the Churning​ Department? ​(Round all amounts to the nearest​ cent, $X.XX.)

Direct material cost
Conversion cost
Total cost

Requirement 3. How much did it cost to make a partially completed pound of butter in the Churning​ Department? Does this make​ sense? Why or why​ not?

How much did it cost to make a partially completed pound of butter in the Churning​ Department? ​(Round all amounts to the nearest​ cent, $X.XX.)

Direct material cost
Conversion cost
Total cost

Does this make​ sense? Why or why​ not?

No, this does not make sense

because

% of the

have not yet been added.

Answer 1

UNITS TO ACCOUNT FOR:
Beginning Work in Process units					75,000
Add: Units Started in Process					1,800,000
Total Units to account for:					1,875,000
Equivalent Units:
			UNITS	Material Cost		Conversion
				% Completion	Units	% Completion	Units
Units started and completed			1665000	100%	1,665,000	100%	1,665,000
Ending Work in Process			210000	100%	210,000	50%	105,000
Total Equivalent units			1875000		1,875,000		1,770,000
TOTAL COST TO ACCOUNT FOR:
				Material		Conversion
Beginning work in Process				292,500		98,600
Cost Added during May				1,770,000		574,000
Total Cost to account for:				2,062,500		672,600
Total Cost to account for:						2,735,100
COST PER EQUIVALENT UNIT:
				Material		Conversion
Total cost added during the year				2,062,500		672,600
Equivalent Units				1,875,000		1,770,000
Cost per Equivalent unit				1.1		0.38
TOTAL COST ACCOUNTED FOR:
Units started and Transferred out (1665000 units)
				Material	Conversion	Total Cost
Equivalent units				1,665,000	1665000	1665000
Multiply: Cost pr unit				1.1	0.38	1.48
Cost assigned to completed units				1831500	632700	2464200
Ending Work in process (210,000 units)
				Material	Conversion	Total Cost
Equivalent units				210,000	105000
Multiply: Cost pr unit				1.1	0.38	1.48
Cost assigned to completed units				231000	39900	270900
Req 2.
Cost of one pound of butter:
Direct material		1.1
Conversion cost		0.38
Total cost		1.48
Req 3.
Material		231000
conversion		39900
Total cost		270900
No, this does not make sense because 50% of conversion has not been added