Question

GroFast Company manufactures a high-quality fertilizer, which is used primarily by commercial veg-etable growers. Two departments are involved in the production process. In the Mixing Department, various chemicals are entered into production. After processing, the Mixing Department transfers a chemical called Chemgro to the Finishing Department. There the product is completed, packaged, and shipped under the brand name Vegegro.

Various chemicals----->Mixing Dept.----->Chemgro----->Finishing Dept.----->Vegegro----->

In the Mixing Department, the raw material is added at the beginning of the process. Labor and overhead are applied continuously throughout the process. All direct departmental overhead is traced to the departments, and plant overhead is allocated to the departments on the basis of direct-labor. The plant overhead rate for 20x2 is $.40 per direct-labor dollar.

The following information relates to production during November 20x2 in the Mixing Department.

a. Work in process, November 1 (4,000 pounds, 75 percent complete as to conversion):

Raw material .............................................................................................................................................................$22,800

Direct labor at $5.00 per hour .................................................................................................................................24,650

Departmental overhead ...........................................................................................................................................12,000

Allocated plant overhead .........................................................................................................................................9,860

b. Raw material:

Inventory, November 1, 2,000 pounds ................................................................................................................$10,000

Purchases, November 3, 10,000 pounds ............................................................................................................51,000

Purchases, November 18, 10,000 pounds ..........................................................................................................51,500

Released to production during November, 16,000 pounds

c. Direct-labor cost, $103,350

d. Direct departmental overhead costs, $52,000

e. Transferred to Finishing Department, 15,000 pounds

f. Work in process, November 30, 5,000 pounds, 20 percent complete

The company uses weighted-average process costing to accumulate product costs. However, for raw-material inventories, the firm uses the FIFO (i.e., first in, first out) inventory method.

Required: 1. Prepare a production report for the Mixing Department for November 20x2. The report should show:

a. Equivalent units of production by cost factor (i.e., direct material and conversion).

b. Cost per equivalent unit for each cost factor. (Round your answers to the nearest cent.)

c. Cost of Chemgro transferred to the Finishing Department.

d. Cost of the work-in-process inventory on November 30, 20x2, in the Mixing Department.

2. Prepare journal entries to record the following events:

a. Release of direct material to production during November.

b. Incurrence of direct-labor costs in November.

c. Application of overhead costs for the Mixing Department (direct departmental and allocated plant overhead costs.)

d. Transfer of Chemgro out of the Mixing Department.

Answer 1

Production report of Mixing Department:
(weighted average method)
	Phy units	Material	Conversion costs	Total
Open WIP	4000	4000	4000
Started and completed	11000	11000	11000
Transferred out to finish	15000
Close WIP	5000	5000	1000
Equivalent units		20000	16000
Total Costs:
Open WIP		22800	46510			(24650+12000+9860)
Incurred during month		81600	196690			Issue of Mat
Total Costs:		104400	243200			(10000+51000+(51500*2/5)
Cost per Eq unit		5.22	15.2			Conversion cost incurred
Cost of Transferred out		15000*5.22=78300	15000*15.2=228000	306300		(103350+52000+(103350*0.40)
Cost of Close WIP		5000*5.22=26100	1000*15.20=15200	41300
JOURNAL ENTRIES:
a	WIP	81600
	Material		81600
	(to record material consumed during month)
b	WIP	103350
	Payroll		103350
	(to record direct labor to WIP)
c	WIP	93340
	Manufacturing Overhead		52000
	Plant Overhead		41340
	(to record overhead to WIP)
d	WIP - Finishing Deptt.	306300
	WIP		306300
	(to record transfer of FG to finishing deptt.)