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In: Accounting

FLORIDA CORPORATION…. manufactures shampoo in two departments, Mixing and Packing. Once the shampoo mixture is completed...

FLORIDA CORPORATION…. manufactures shampoo in two departments, Mixing and Packing. Once the shampoo mixture is completed in the Mixing Department, it is sent to the Packing department, where a machine fills and seals individual bottles, which are then passed to a machine that places the bottles in individual boxes.

The company uses the weighted average method for process costing in both departments.   In the Mixing Department, the materials are all added at the start of the process.

The production report for the mixing department was as follows:

In the Packing department, however, we have several different materials and, therefore, materials are added at different parts of the process. (The percentage of completion amounts are given, so that you don’t have to figure out what materials are added where.)

NOTE: FOR EXTRA PRACTICE, YOU CAN TAKE THE UNIT INFORMATION AND COSTS TO ACCOUNT FOR AND SEE IF YOU COME UP WITH THE ANSWERS ABOVE!

ALSO, IF YOU WISH TO TRY THIS PROBLEM (EITHER DEPARTMENT) USING THE FIFO METHOD, email me and I will send you a solution.

Now consider the company’s 2nd department, the Packing Department. The following information is related to production in the Packing Department for February, 2013 (the same month):

Unit Information - Packing Department

Units to account for

Beginning work in process (60%

materials, 50% as to conversion)

14,500

Transferred from Mixing

?

Ending work in process (80%

materials, 60% conversion)

35,000

Cost Information

Material

Conversion

Transferred In

Total

Beginning work in process

$925

$175

$3,410

$4,510

Current

83,900

25,645

?

?

$84,825

$25,820

?

?

Required:

For requirements 1 and 2, assume that all units produced were “good” units and met the company’s quality-control standards. In doing your computations, allow Excel to make complete computations, but round ALL equivalent unit costs to 4 decimal places for display purposes only.

  1. WHY would a company choose to use the Weighted Average method instead of the FIFO Method? Which is more accurate?

  1. Prepare a production report for the Packing Department

  1. Prepare the journal entry to record the completion of units in the both the Mixing and Packing Departments.

  1. Suppose that the units are inspected at the end of the mixing department before they are transferred to packing, and 10,000 of the units failed inspection and were removed from production at that point. That is, suppose that 10,000 units were “spoilage” and only 635,000 were completed and transferred to packing.

  1. Would this change the equivalent units of materials or conversion? Explain. If so, what would the new equivalent unit costs of materials and conversion be? What effect would this have on the company’s income statement and balance sheet?

  1. What if, instead of the units being inspected at the END of the mixing, instead, the inspection point happened to be when they were 60% completed. What would be the answers to (a) above NOW?

Solutions

Expert Solution


ekkarill92 answered 2 years ago
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