Question

Mastery Problem: Process Cost Systems

Grainy Goodness Company

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.

Cost of Production

Jonathan has noticed that his production manager has omitted some of the data on the Cost of Production. 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
Unit Information
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:
		Equivalent Units
	Whole Units	Direct Materials	Conversion
Inventory in process, March 1 (35% 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
Cost Information
Cost per equivalent unit:
		Direct Materials	Conversion
Total costs for March in Mixing Department		$40,660	$36,765
Total equivalent units		÷	÷
Cost per equivalent unit		$	$
Costs assigned to production:
	Direct Materials	Conversion	Total
Inventory in process, March 1	$2,200	$525	$2,725
Costs incurred in March			77,425
Total costs accounted for by the Mixing Department			$80,150
Cost allocated to completed and partially completed units:
Inventory in process, March 1-balance			$2,725
To complete inventory in process, March 1		1,235	1,235
Cost of completed March 1 work in process			$3,960
Started and completed in March	37,450	33,250	70,700
Transferred to Baking Department in March			$
Inventory in process, March 31	3,210	2,280
Total costs assigned by the Mixing Department			$

Feedback

Review the format and the steps to complete the Cost of Production Report.

February Cost Analysis

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. 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	$

Feedback

Look for the dollar amount and number of equivalent units on the Cost of Production Report that pertain to the inventory in process on March 1. Don’t forget that direct materials are added at the beginning of the process and so have all been added to inventory in process on March 1. The conversion costs are only partially complete.

March Cost Analysis

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. 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	$

Feedback

Look for the dollar amount and number of equivalent units on the Cost of Production Report that pertain to the costs and units added in March. Don’t forget that direct materials are added at the beginning of the process. The conversion costs are added evenly through the month.

Mixing Dept. Evaluation

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

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

For which component was the cost per unit for March higher than in February?

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

Feedback

What per-unit costs have increased in March when compared to February? How can you tell what is creating that change?

Journal

On March 31, using the data provided on the Cost of Production, journalize the entry to move the appropriate amount of cost from the Mixing Department to the Baking Department. If an amount box does not require an entry, leave it blank.

Mar. 31

Feedback

Review the Cost of Production Report you prepared to determine the amount of cost that was transferred from the Mixing Department to the Baking Department in March.

Feedback

Partially correct

Answer 1

	Grainy Goodness Company
	Cost of Production Report-Mixing Department
	For the Month Ended March 31
	Unit Information
	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:
			Equivalent Units
		Whole	Direct	Conversion
		Units	Materials
	Inventory in process, March 1 (35% completed)	2,000	0	1300	(2000*65%)
	Started and completed in March	35,000	35,000	35,000
	Transferred to Baking Department in March	37,000	35,000	36,300
	Inventory in process, March 31 (80% completed)	3,000	3,000	2400	(3000*80%)
	Total units to be assigned costs	40,000	38,000	38,700
	Cost Information
	Cost per equivalent unit:
			Direct	Conversion
			Materials
	Total costs for March in Mixing Department		$40,660	$36,765
	Total equivalent units		38,000	38,700
	Cost per equivalent unit		$1.07	$0.95
	Costs assigned to production:
		Direct	Conversion	Total
		Materials
	Inventory in process, March 1	$2,200	$525	$2,725
	Costs incurred in March			77,425
	Total costs accounted for by the Mixing Department			$80,150
	Cost allocated to completed and partially completed units:
	Inventory in process, March 1-balance C			$2,725
	To complete inventory in process, March 1 D		1,235	1,235
	Cost of completed March 1 work in process B			$3,960
	Started and completed in March A	37,450	33,250	70,700
	Transferred to Baking Department in March S=A+B+C+D`	37,450	34,485	$74,660
	Inventory in process, March 31 I	3,210	2,280	5,490
	Total costs assigned by the Mixing Department S+I	40,660	36,765	$80,150
	Cost Analysis for February - Mixing Department
		Amount	Equivalent Units	Cost per Unit
	Direct Materials in inventory in process, March 1	$2,200	2000	$1.10
	Conversion costs in inventory in process, March 1	$525	700	$0.75
			(2000*35%)
			Total cost per unit	$1.85
		Amount	Equivalent Units	Cost per Unit
	Costs for March: Direct Materials	$40,660	38,000	$1.07
	Costs for March: Conversion	$36,765	38,700	$0.95
			Total cost per unit	$2.02
	Yes per unit cost is increased in March as compare to February because of increase in conversion cost by $.20
	Accounts title	Dr	Cr
31-Mar	Work iN process-Baking Department	$74,660
	Work iN process-Mixing Department		$74,660
If any doubt please comment. If satisfied rate