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In: Accounting

QUESTION 2 (33 marks) (Module 5) Mist Fertilizer Ltd manufactures pre-mixed garden fertilizer for the garden...

QUESTION 2 (Module 5) Mist Fertilizer Ltd manufactures pre-mixed garden fertilizer for the garden centre retail market. The original ingredients including nitrogen, phosphorous and potassium components are mixed in the Primary Process Department (PPD). The fertilizer mix is then transferred to the Granulating and Blending Department (G&BD) for blending and drying (and where a final ingredient is added 70% through the process) and then the mix is transferred to the Bagging Department (BD) where the product is finished and bagged ready for sale. Conversion costs (labour and overheads) are assumed to be incurred evenly throughout the process. In the Granulating and Blending Department (G&BD) at the commencement of June 2018, there were 10,800 kgs of mixture in progress, 50% complete, costing at 1 June 2018 $40,550 from the prior PPD, as well as $10,400 for conversion costs incurred in the G&BD so far. During the month of June, a further 80,000 kg of fertilizer mix came into the G&BD from the PPD, with costs attached from that prior department amounting to $109,270. The cost of mixture ingredients in the G&BD for June amounted to $108,960 while conversion costs incurred were $250,525. At the end of June there were 15,300 kgs of mixture on hand at the 75% point in the process, the rest having been transferred to the Bagging Department (BD). Required Using the excel templates provided below, determine the cost of the completed Granulating and Blending Department mixture for June, the cost of the incomplete mixture at the end of June, complete the Granulating and Blending Department Work In Process (WIP) Inventory Ledger Account for June, and prepare the general journal entry for materials transferred out of Granulating and Blending Department WIP during June using: a) the Weighted Average costing assumption . b) the FIFO assumption . c)

DATA

XZY Ltd

Product X

Product Y

Product Z

Average selling price

$               8.00

$            6.00

$         40.00

Average variable overheads

$               1.60

$             1.20

$          8.00

Prime costs (direct materials & labour)

$               5.00

$             3.00

$         26.00

Total capacity at sales product mix

          8,000,000

        5,000,000

        600,000

Aactual production

          7,900,000

        4,800,000

        560,000

XZY Ltd

Schedule of Contribution Margin not Realized

Product X

Product Y

Product Z

Average selling price

Average variable overheads

Prime costs (direct materials & labour)

Contribution per unit

Total capacity at sales product mix

Aactual production

Lost production (B)

Capacity not utilized (%)

Contribution margin not realized (AxB)

Solutions

Expert Solution

Solution:

XZY Ltd

Schedule of Contribution Margin not Realized

Product X

Product Y

Product Z

Average selling price (1)

$8

$6

$40

Average variable overheads (2)

$1.60

$1.20

$8

Prime costs (direct materials & labour) (3)

$5

$3

$26

Contribution per unit (A) [(1 - 2 - 3)]

$1.40

$1.80

$6.00

Total capacity at sales product mix

8,000,000

5,000,000

600,000

Aactual production

7,900,000

4,800,000

560,000

Lost production (B)

100,000

200,000

40,000

Capacity not utilized (%)

1.25%

4.00%

6.67%

Contribution margin not realized (AxB)

$140,000

$360,000

$240,000

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you


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