Precision Chemical Company (PCC) produces a variety of specialty chemicals used in the pharmaceutical industry and construction industry. PCC spends almost 20 percent of its net revenues on research, product development, and customer development to achieve its reputation as a high-quality producer of chemicals, a reliable supplier, and a great provider of customer service. PCC has a small number of large customers, each of which typically has one or more large orders being processed at PCC at any given point in time. These orders are typically completed over one to three months or longer. PCC uses job costing to keep track of total job costs over the duration of each order and process costing to keep track of monthly costs, department by department. The processing departments include mixing, reacting (in which chemicals are heated and sometimes vacuum is applied), cleaning, inspecting, packaging, and distribution. Much of the total product cost is accumulated in the first two processes, mixing and reacting. The following information is for activity and costs in the first two departments during the current month. The mixing department started 84,000 gallons this month. No spoilage is measured in the mixing department, but a careful measure of the loss of material in reacting is taken after the completion of the reacting process. No materials are added in the reacting process. The number of gallons lost (spoilage) is considered normal spoilage and is considered to have lost the full cost of processing up to that point of inspection. PCC uses the weighted-average method for process costing. Work-in-process for the two departments are as follows. Percentage completion for conversion costs are 60% and 80% in the mixing department for beginning and ending inventory, respectively. The percentage completion for conversion costs for the reacting department for beginning and ending inventory are 30% and 40%, respectively.

 

		Mixing Department		Reacting Department
Beginning WIP		22,000	gallons	16,500	gallons
Ending WIP		28,000	gallons	18,250	gallons
Spoilage		0	gallons	2,250	gallons
Mixing Dept.	Materials	Conversion
Beginning WIP	$63,420	$235,480
Current costs	288,500	989,400
Reacting Dept.		Conversion
Beginning WIP		388,500
Current costs		1,245,320
Total		1,633,820

Required

1. Prepare the production cost report for the mixing department

2. Prepare the production cost report for the reacting department

3. What comments and observations do you have about the two departments’ costreports?