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.
Myer’s Treats uses one gallon of mix for each cake produced by the Baking Department. On August 1, the Baking Department had 600 cakes in process. These units were 100 percent complete with respect to batter transferred in from the Mixing Department during July, but only 80 percent complete with respect to direct (frosting) materials, and 40 percent complete with respect to conversion. Costs applied to these units carried forward from July totaled $5,880. Costs incurred by the Baking Department during August included $34,185 of direct materials and $67,860 of conversion. The ending inventory in the Baking Department on August 31 consisted of 500 cakes in process. These units were 100 percent complete with respect to batter transferred in from the Mixing Department, but only 75 percent complete with respect to direct (frosting) materials, and 10 percent complete with respect to conversion.

a. Compute how many cakes were started in the Baking Department during August.

b. Prepare a schedule showing: (1) cakes transferred out of the Baking Department in August, and (2) cakes started and completed by the Baking Department in August.

c. Compute the equivalent units of input resources for the Baking Department in August.

d. Compute the cost per equivalent unit of input resource for the Baking Department in August.

e. Prepare the summary journal entry required to transfer the cost of baked cakes from the Baking Department's Work in Process Inventory to the company's Finished Goods Inventory in August.

f. Compute the total cost assigned to the Baking Department's ending inventory in process on August 31.

Answer 1

Cost of Production Report - Mixing Department
For the Month ended August 31
Particulars		Equivalent Units
	Physical Units (In Gallons)	Materials	Conversion Costs
Units Information
Units Charged to Production
Work in process - Beginning	500
Started into production	11,500
Total units	12,000
Units accounted for
Goods Units Completed & transferred out:
From Beginning WIP	500	-	350
(0% materials, 70% conversion costs)	.
Started & Completed (11,400 - 500)	10,900	10,900	10,900
Work in process, Ending	600	600	150
(100% materials, 25% conversion costs)
Equivalent units accounted for	12,000	11,500	11,400
	Materials	Conversion Costs	Total
Total Cost to Account for:
WIP, Beginning	-	-	1,800
Cost added in current period	34,500	22,800	57,300
Total cost to be account for	34,500	22,800	59,100
Cost added in current period	34,500	22,800	57,300
Equivalent Units of work done in current Period	11,500	11,400
Cost per Equivalent Unit	3.00	2.00	5.00
Assignment of Costs:
Goods Units and Completed out (11,400 Gallons)
WIP, Beginning - 500 Gallons	-	-	1,800
Cost added to Beg. WIP in Current period	-	700	700
		(350 gallons X $2)
Total of Beginning Inventory	-	700	2,500
Started and completed - 10,900 Galons	32,700	21,800	54,500
	(10,900 gallons X $3)	(10,900 gallons X $2)
Total Cost of good units completed & transferred out	32,700	22,500	57,000
WIP, Ending - 600 Gallons	1,800	300	2,100
	(600 gallons X $3)	(150 gallons X $2)
Total Cost accounted For	34,500	22,800	59,100
Cost of Production Report - Baking Department
For the Month ended August 31
Particulars	Physical Units	Equivalent Units
		Batter Mix	Materials	Conversion Costs
Units Information
Units Charged to Production
Work in process - Beginning	600
Started into production	11,400
Total units	12,000
Units accounted for
Goods Units Completed & transferred out:
From Beginning WIP	600	-	120	360
(0% Batter Mix, 20% materials, 60% conversion costs)	.
Started & Completed (11,500 - 600)	10,900	10,900	10,900	10,900
Work in process, Ending	500	500	375	50
(100% Batter Mix, 75% materials, 10% conversion costs)
Equivalent units accounted for	12,000	11,400	11,395	11,310
	Batter Mix	Materials	Conversion Costs	Total
Total Cost to Account for:
WIP, Beginning	-	-		5,880.00
Cost added in current period	57,000.00	34,185.00	67,860.00	159,045.00
Total cost to be account for	57,000.00	34,185.00	67,860.00	164,925.00
Cost added in current period	57,000.00	34,185.00	67,860.00	159,045.00
Equivalent Units of work done in current Period	11,400.00	11,395.00	11,310.00
Cost per Equivalent Unit	5.00	3.00	6.00	14.00
Assignment of Costs:
Goods Units and Completed out (11,500 Cakes)
WIP, Beginning - 600 Cakes	-	-	-	5,880.00
Cost added to Beg. WIP in Current period	-	360.00	2,160.00	2,520.00
		(120 Cakes X $3)	(360 Cakes X $6)
Total of Beginning Inventory	-	360.00	2,160.00	8,400.00
Started and completed - 10,900 Cakes	54,500.00	32,700.00	65,400.00	152,600.00
	(10,900 Cakes X $5)	(10,900 Cakes X $3)	(10,900 Cakes X $6)
Total Cost of good units completed & transferred out	54,500.00	33,060.00	67,560.00	161,000.00
WIP, Ending - 500 Cakes	2,500.00	1,125.00	300.00	3,925.00
	(500 Cakes X $5)	(375 Cakes X $3)	(50 Cakes X $6)
Total Cost accounted For	57,000.00	34,185.00	67,860.00	164,925.00
Answer 1.
Cakes were started in the Baking Department during August	11,400.00
Answer 2 - a & b.
Units Charged to Production
Work in process - Beginning	600
Started into production	11,400
Total units	12,000
Units accounted for
Goods Units Completed & transferred out:
From Beginning WIP	600
(0% Batter Mix, 20% materials, 60% conversion costs)	.
Started & Completed (11,500 - 600)	10,900
Work in process, Ending	500
(100% Batter Mix, 75% materials, 10% conversion costs)
Equivalent units accounted for	12,000
Answer 2 - c.
	Batter Mix	Materials	Conversion Costs
Equivalent Units	11,400	11,395	11,310
Answer 2 - d.
	Batter Mix	Materials	Conversion Costs
Cost per Equivalent Unit	5.00	3.00	6.00

Answer 2-e.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
a1	Finsihed Goods Inventory	161,000.00
	WIP - Baking Department		161,000.00
	(Record the fin. inventory produced)
Answer 2-f
	Work in Process - Baking Department - Aug 31	3,925.00