Question

Question 3 (30 pts)

Kobani Corporation produces high quality Greek yogurts that pass through three departments – Fermentation Department (Department I), Mixing Department (Department II), and Packaging Department (Department III).

The production process in the Mixing Department requires the input of two main types of ingredients. One is the basic ingredients and the other one is the special ingredients. 100% of the basic ingredients are added at the beginning of the process. For the special ingredients, they are added gradually. 30% of these special ingredients are added at the beginning of the process, 50% are added midway through the process and the remainder of the special ingredients are added at the three-quarter way through the process.

The following information was available concerning the operation of the Mixing Department for the month of October 2020.

Beginning work-in process (WIP) (1 October 2020): 2,500 units were 40% completed with respect to conversion costs (CC). Costs pertaining to the beginning WIP as at 1 October 2020 were: Department I $10,000, Basic Ingredients $30,000, Special Ingredients $15,000 and CC $10,000.

Units started in the month were 15,000 units. Costs added to production during the month of October 2020 were: Department I $60,000, Basic Ingredients $188,750, Special Ingredients $203,400, and CC $154,500.

Ending WIP as at 31 October 2020 were 3,500 units and 70% completed with respect to CC.

Required:

A) Use of the weighted average (WA) process costing method, calculate

i. the units completed in October 2020.
ii. the equivalent units for the Special Ingredients.
iii. the total costs per equivalent unit.

iv. the total costs of completed products transferred to the Packaging Department.

B) Use the first-in-first-out (FIFO) process costing method, calculate

v. the units completed in October 2020.
vi. the equivalent units for the Special Ingredients.
vii. the total costs per equivalent unit.

viii) the total costs of completed products transferred to the Packaging Department.

C) Discuss the main differences of the FIFO method as compared to the weighted average method. In what situation will the results from the two methods produce similar result?

Answer 1