Question

Grainy Goodness Company manufactures granola cereal by a series of three processes, beginning materials such as oats, sweeteners, and nuts being introduced in the Mixing Department. From the Mixing Department, the materials pass through the Baking and Packaging departments, emerging as boxed granola cereal ready for shipment to retail outlets. Direct materials are added at the beginning of each process, and conversion costs are incurred evenly throughout production in each department.

During March, the President and sole stockholder, Jonathan Groat, reviewed the Cost of Production Report for the Mixing Department. He is concerned that the Mixing Department may not be operating efficiently, and asks for your help.

	Required:
1.	Jonathan has noticed that his production manager has omitted some of the data on the Cost of Production panel. Determine the missing information. If there is no amount or an amount is zero, enter "0".*
2.	On the February Cost Analysis panel, determine the cost per unit of direct materials and for conversion for the month of February using the completed data on the Cost of Production panel.*
3.	On the March Cost Analysis panel, determine the cost per unit of direct materials and for conversion for the month of March using the completed data on the Cost of Production panel.*
4.	After reviewing your work on the February Cost Analysis and March Cost Analysis panels, assist Jonathan Groat in evaluating the Mixing Department’s performance by answering the questions on the Mixing Dept. Evaluation panel.
5.	On March 31, using the data provided on the panels, journalize the entry to move the appropriate amount of cost from the Mixing Department to the Baking Department. Refer to the Chart of Accounts for exact wording of account titles. *Round your per-unit computations to the nearest cent, if required.

CHART OF ACCOUNTS
Grainy Goodness Company
General Ledger
ASSETS 110 Cash 112 Accounts Receivable 125 Notes Receivable 126 Interest Receivable 131 Materials 141 Work in Process-Mixing 142 Work in Process-Baking 143 Work in Process-Packaging 151 Factory Overhead-Mixing 152 Factory Overhead-Baking 153 Factory Overhead-Packaging 161 Finished Goods 171 Office Supplies 172 Prepaid Insurance 173 Prepaid Expenses 181 Land 191 Factory 192 Accumulated Depreciation-Factory LIABILITIES 210 Accounts Payable 215 Notes Payable 221 Utilities Payable 236 Interest Payable 251 Wages Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 520 Wages Expense 529 Selling Expenses 531 Utilities Expense 532 Depreciation Expense-Factory 533 Insurance Expense 534 Office Supplies Expense 540 Administrative Expenses 590 Miscellaneous Expense 710 Interest Expense

1. Jonathan has noticed that his production manager has omitted some of the data on the Cost of Production panel. Determine the missing information. If there is no amount or an amount is zero, enter "0". Round your per-unit computations to the nearest cent, if required.

GRAINY GOODNESS COMPANY
Cost of Production Report-Mixing Department
For the Month Ended March 31
UNITS	Whole Units	Equivalent Units
		Direct Materials	Conversion
Units charged to production:
Inventory in process, March 1	2,000
Received from materials storeroom	38,000
Total units accounted for by the Mixing Department	40,000
Units to be assigned costs:
Inventory in process, March 1 (40% completed)	2,000	?	?
Started and completed in March	35,000	35,000	35,000
Transferred to Baking Department in March	37,000	?	?
Inventory in process, March 31 (80% completed)	3,000	?	?
Total units to be assigned costs	40,000	?	?

COSTS	Costs
	Direct Materials	Conversion	Total
Costs per equivalent unit:
Total costs for March in Mixing Department	$41,420	$38,600
Total equivalent units	÷?	÷?
Cost per equivalent unit	?	?
Costs assigned to production:
Inventory in process, March 1	$2,300	$640	$2,940
Costs incurred in March			80,020
Total costs accounted for by the Mixing Department			$82,960
Cost allocated to completed and partially completed units:
Inventory in process, March 1-balance			$2,940
To complete inventory in process, March 1	$0.00	$1,200	1,200
Cost of completed March 1 work in process			$4,140
Started and completed in March	$38,150	$35,000	73,150
Transferred to Baking Department in March			?
Inventory in process, March 31	$3,270	$2,400	?
Total costs assigned by the Mixing Department			?

2. Determine the cost per unit of direct materials and for conversion for the month of February using the completed data on the Cost of Production panel. Round your per-unit computations to the nearest cent, if required.

Cost Analysis for February - Mixing Department
	Amount	Equivalent Units	Cost per Unit
Direct Materials in inventory in process, March 1	?	?	?
Conversion costs in inventory in process, March 1	?	?	?
		Total cost per unit	?

3. Determine the cost per unit of direct materials and for conversion for the month of March using the completed data on the Cost of Production panel. Round your per-unit computations to the nearest cent, if required.

Cost Analysis for March- Mixing Department
	Amount	Equivalent Units	Cost per Unit
Costs for March: Direct Materials	?	?	?
Costs for March: Conversion	?	?	?
		Total cost per unit	?

4. After reviewing your work on the February Cost Analysis and March Cost Analysis panels, assist Jonathan Groat in evaluating the Mixing Department’s performance by answering the following questions:

a) In March, was the Mixing Department’s total cost per unit higher or lower than in February?

[ ] No difference

[ ] Lower

[ ] Higher

b) For which component(s) was the cost per unit for March higher than in February? Check all that apply.

[ ] Direct material costs

[ ] Both were higher for March

[ ] Conversion costs

c) What is most probably your recommendation to Jonathan Groat given your computations?

[ ] Investigate a detailed breakdown of direct materials cost to determine the source of the higher per-unit cost.

[ ] Look into creating higher incentives for administrative staff in order to create more effective reporting procedures.

[ ] Pay higher commissions to salespeople to spur sales.

[ ] Investigate a detailed breakdown of conversion costs to determine the source of the higher per-unit cost.

5. On March 31, using the data provided on the panels, journalize the entry to move the appropriate amount of cost from the Mixing Department to the Baking Department. Refer to the Chart of Accounts for exact wording of account titles.

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2

Answer 1

1. Determine the missing information as follows:

GRAINY GOODNESS COMPANY Cost of Production Report-Mixing Department For the Month Ended March 31
UNITS	Equivalent Units
	Whole Units	Direct Materials	Conversion
Units charged to production:
Inventory in process, March 1	2,000	2,000	2,000
Received from materials storeroom	38,000	38,000	38,000
Total units accounted for by the Mixing Department	40,000	40,000	40,000
Units to be assigned costs:
Inventory in process, March 1 (40% completed)	2,000	0	1,200
Started and completed in March	35,000	35,000	35,000
Transferred to Baking Department in March	37,000	35,000	36,200
Inventory in process, March 31 (80% completed)	3,000	3,000	2,400
Total units to be assigned costs	40,000	38,000	38,600

COSTS	Costs
	Direct Materials	Conversion	Total
Cost per equivalent unit:
Total costs for March in Mixing Department	41,420	38,600	80,020
	÷	÷
Total equivalent units	38,000	38,600
Cost per equivalent unit	1.09	1.00
Costs assigned to production:
Inventory in process, March 1	2,300	640	2,940
Costs incurred in March	41,420	38,600	80,020
	(38,150+3,270)	(80,020-41,420)
Total costs accounted for by the Mixing Department			82,960
Cost allocated to completed and partially completed units:
Inventory in process, March 1 balance			2,940
To complete inventory in process, March 1	0.00	1,200	1,200
Cost of completed March 1 work in process			4,140
Started and completed in March	38,150	35,000	73,150
Transferred to Baking Department in March	38,150	36,200	74,350
Inventory in process, March 31	3,270	2,400	5,670
Total costs assigned by the Mixing Department	41,420	38,600	80,020

2. Determine the cost per unit of direct materials and for conversion for the month of February using the completed data on the Cost of Production panel as follows:

Cost Analysis for February - Mixing Department
	Amount	Equivalent Units	Cost per Unit
Direct Materials in inventory in process, March 1	2,400	2,000	1.20
Conversion costs in inventory in process, March 1	525	800	0.65625
		(2,000*40%)
Total cost per unit			1.85625

3. Determine the cost per unit of direct materials and for conversion for the month of March using the completed data on the Cost of Production panel.

Cost Analysis for March- Mixing Department
	Amount	Equivalent Units	Cost per Unit
Costs for March: Direct Materials	41,420	38,000	1.09
Costs for March: Conversion	38,600	38,600	1.00
Total cost per unit			2.09

4. In March, the Mixing Department’s total cost per unit higher was Higher.

Conversion costs was higher in March.

Investigate a detailed breakdown of direct materials cost to determine the source of the higher per-unit cost.

5. Journal entry as follows:

Account Title and Explanation	Debit $	Credit $
Work in process baking department	74,350
Work in process Mixing department		74,350
(To record transfer of amount of cost from the Mixing Department to the Baking Department)

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