Question

Fanning Cola Corporation produces a new soft drink brand, Sweet Spring, using two production departments: mixing and bottling. Fanning’s beginning balances and data pertinent to the mixing department’s activities for 2018 follow:

Accounts	Beginning Balances
Cash	$	46,000
Raw materials inventory		14,700
Production supplies		100
Work in process inventory (390,000 units)		46,800
Common stock	$	109,800

1. Fanning Cola issued additional common stock for $55,000 cash.
2. The company purchased raw materials and production supplies for $30,390 and $700, respectively, in cash.
3. The company issued $32,940 of raw materials to the mixing department for the production of 600,000 units of Sweet Spring that were started in 2018. A unit of soft drink is the amount needed to fill a bottle.
4. The mixing department used 2,300 hours of labor during 2018, consisting of 2,100 hours for direct labor and 200 hours for indirect labor. The average wage was $9.40 per hour. All wages were paid in 2018 in cash.
5. The predetermined overhead rate was $1.60 per direct labor hour.
6. Actual overhead costs other than indirect materials and indirect labor for the year amounted to $1,240, which was paid in cash.
7. The mixing department completed 800,000 units of Sweet Spring. The remaining inventory was 30 percent complete.
8. The completed soft drink was transferred to the bottling department.
9. The ending balance in the Production Supplies account was $560.
10. Required

11. Determine the number of equivalent units of production.

12. Determine the product cost per equivalent unit.

13. Calculate the total cost allocated between the ending work in process inventory and units transferred to the bottling department.

14. Record the transactions in T-accounts.

Determine the number of equivalent units of production. Determine the product cost per equivalent unit. (Round "Cost per equivalent unit" answer to 2 decimal places.)

a. Equivalent units b. Cost per equivalent unit

  

Calculate the total cost allocated between the ending work in process inventory and units transferred to the bottling department. (Round intermediate calculations to 2 decimal places.)

Cost Allocation To the bottling department To ending work-in-process inventory Total allocated cost

Record the transactions in T-accounts. (The cash expenditures in events No. 2 and No. 4 should be combined into a single amount in the cash account for each event. Round intermediate calculations to 2 decimal places.)

Cash Raw Materials Beg. bal. Beg. bal. End. bal. End. bal. Work in process Mixing Work in process Bottling Beg. bal. Beg. bal. End. bal. End. bal. Manufacturing Overhead Production Supplies Beg. bal. Beg. bal. End. bal. End. bal. Common Stock Beg. bal. End. bal.

Answer 1

a. Schedule of Equivalent units

Particulars	Whole Units	Equivalent Units
		%	Units
Beginning Inventory	390000
Units added to production	600000
Total Units to be accounted for	990000
Transferred to bottling units	600000	100%	600000
Ending Inventory	390000	30%	117000
Total Units to be accounted for	990000		717000

b. Determination of Product Cost per unit

Particulars	Amount
Beginning Inventory	46800
Cost added to production*	56040
Total to be accounted for	102840
Total equivalent units	717000
Cost per equivalent unit	0.14

*Cost added to production = Direct Material + Direct Labor + Overhead

= 32,940 + (2,100 * 9.40) + (2,100 * 1.60)

= 56,040

c. Calculation of cost allocation

Transferred to Bottling Department (390,000 * 0.14)	54600
Ending Inventory (117,000 * 0.14)	16380
Total Allocated Cost	70980

d. T-accounts

Cash
Beg Balance	46000	By Raw Material	30390
To Common Stock	56000	By Production Supplies	700
		By WIP mixing (2100 * 9.4)	19740
		By Manufacturing overhead (200 * 9.4)	1880
		By Manufacturing overhead (2100 * 1.6)	3360
End Balance	45930

Raw Material
Beg Balance	14700
Cash	30390
End Balance	45090

WIP Mixing
Beg Balance	46800	WIP Bottling	54600
Cash	19740
End Balance	11940

WIP Bottling
Beg Balance	0
WIP Mixing	54600	End Balance	54600

Manufacturing Overhead
Cash	1880
Cash	3360
Production Supplies	240
End Balance	5480

Production Supplies
Beg Balance	100	By Mfg OH	240
Cash	700
End Balance	560

Common Stock
End Balance	164800	Beg Balance	109800
		By Cash	55000