Question

The Hershey Company makes candy for the retail consumer market. One product is the well-known, Chocolate Kiss. It manufactures this product in the following departments: Melting, Molding, and Wrapping.

In the Melting Department, the food ingredients including unsweetened chocolate are placed in large melting vats along with sugar in specific proportions. They are melted together in order to perfect this well-known candy. The result is a gooey-blend of melted chocolate.

This mixture is transferred from the Melting Department to the Molding Department, and is placed in aluminum molds that are shaped like the final product, Chocolate Kisses. The molds are cooled for the required time until hardened. After the chocolate is cooled, it is transferred to the Wrapping Department.

In the Wrapping Department, the solid chocolate pieces are wrapped with silver foil, and a small white paper strip bearing the product name is inserted. Once individually wrapped, they are placed in a consumer-style bag ready to sell in supermarkets.

The company uses the weighted average method in its process cost system. Data for June in the Molding Department follows:

                                 Hershey Company - Molding Department

Units Melting Conversion

Work in process inventory, June 1 2,500 100% 20%

Work in process inventory, June 30 4,000 100% 25%

Melting cost in work in process inventory, June 1 $2,400

Conversion cost in work in process inventory, June 1 $250

Units transferred to the next department 78,500

Melting cost added during June $51,225

Conversion cost added during June $15,650

No raw materials are added in the Molding Department. Melting cost represents the costs of the ingredients transferred in form the Melting Department. The candy is processed in the Molding Department in batches, each unit in the table above is a batch, and one batch of candy mixture produces a set amount of Chocolate Kisses that is passed into the Wrapping Department.

Required:

1. Compute the Molding Department’s equivalent units of production for mixing and conversion in June.

2. Compute the Molding Department’s cost per equivalent units of production for melting and conversion in June.

3. Compute the Molding Department’s cost of ending inventory for mixing, conversion, and in total for June.

4. Compute the Molding Department’s costs of transferred out to the Wrapping Department for melting, conversion, and in total for June.

5. Prepare a cost reconciliation report for the Molding Department for June.

Answer 1

Equivalent units:
				Units	Mixing	Conversion
Units transferred to the next department				78500	78500	78500
					(78500*100%)	(78500*100%)
Work in process inventory, June 30				4000	4000	1000
					(4000*100%)	(4000*25%)
Equivalent units					82500	79500
Cost per equivalent units:
					Mixing	Conversion
Costs in beginning inventory					2400	250
Costs added					51225	15650
Total costs added					53625	15900
Equivalent units					82500	79500
Cost per equivalent units					0.65	0.2
Cost of ending inventory:
			$
Mixing	(4000*0.65)		2600
Conversion	(1000*0.2)		200
Total			2800
Costs of transferred out to the Wrapping Department:
			$
Mixing	(78500*0.65)		51025
Conversion	(78500*0.2)		15700
Total			66725
Cost reconciliation schedule:
					$
Costs to be accounted for:
Work in process,June 1			(2400+250)		2650
Costs added			(51225+15650)		66875
Total costs					69525
Costs accounted for:
Transferred out					66725
Work in process,June 30					2800
Total costs					69525