Question

Myer’s Treats makes institutional cakes. Finished cakes must pass through two departments: Mixing and Baking. Vats of cake batter are processed in the Mixing Department and then transferred to the Baking Department, where individual cakes are baked, cooled, and frosted. There were 500 gallons of partially mixed batter in the Mixing Department’s inventory on August 1. The batter was 100 percent complete with respect to direct materials, but only 30 percent complete with respect to conversion. Manufacturing costs assigned to the inventory carried forward from July totaled $1,800. During August, the Mixing Department started 11,500 new gallons of batter. August direct materials costs in the Mixing Department totaled $34,500, and conversion costs totaled $22,800. Ending inventory on August 31 consisted of 600 partially mixed gallons of batter. These units were 100 percent complete with respect to direct materials, but only 25 percent complete with respect to conversion. a. Prepare a schedule showing: (1) gallons of mix transferred from the Mixing Department to the Baking Department in August, and (2) gallons of mix started and completed by the Mixing Department in August. b. Compute the equivalent units of input resources for the Mixing Department in August. c. Compute the cost per equivalent unit of input resource for the Mixing Department in August. d. Prepare the summary journal entry required to transfer the cost of fully mixed batter from the Mixing Department to the Baking Department in August. e. Compute the total cost assigned to the Mixing Department's ending inventory on August 31.

Answer 1

Statement 1: Equivalent unir calculation:
Inputs	Details	Outputs	Equivalent units Materials		Equivalent units: converstion
			%	Units	%	Units
500	Stock Opening
11,500	Introduced
	Units completed:
	Opening stock	500	nil	0	70%	350
	Introduced	10,900	100%	10,900	100%	10,900
	Ending stock	600	100%	600	25%	150
12,000	Total	12,000		11,500		11,400

Statement 2: Computation of cost per equivalent units
Details	Calculation	Result
Material cost	$34,500/11,500	$3
Conversion cost	$22,800/11,400	$2

Calculation of cost of units completed and transferred to next process:
Details	Amount	Amount
Cost of opening stock completed
- Cost incurred in July	$1,800
-Conversion cost in August (350 x $2)	$700	$2,500
Cost of units introduced and completed:
- Material cost 10,900 units x $3	$32,700
-Conversion cost 10,900 units x $2	$21,800	$54,500
Total cost of 11,400 units transferred to baking Department		$57,000

Journal entry for transferring thiese completed units in next process is-
	Debit	Credit
Baking Department................................	$57,000	$57,000
Mixing Department..............................
( Cost of 11,400 units completed in mixing department now transferred to Baking Department)

Answer of part (b):
Calculation of value of Ending Stock:
Details	Amount
Material cost (600 units x $3)	$1,800
Conversion cost ( 150 unis x $2)	$300
Total cost of ending inventory	$2,100