(APPENDIX) FIRST-IN, FIRST-OUT METHOD Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: Picking, Encapsulating, and Bottling. In Picking, the ingredients for the cold capsules are measured, sifted, and blended. The mix is transferred out in gallon containers. The encapsulating department takes the powdered mix and places it in capsules. One gallon of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to Bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules.

During March, the following results are available for the first two departments:

Picking Encapsulating Beginning inventories:

Physical units 10 gallons 4,000 Costs:

Materials $252 $32 Labor $282 $20 Overhead ? ?

Transferred in — $140 Current production:

Transferred out 140 gallons 208,000 Ending inventory 20 gallons 6,000 Costs:

Materials $3,636 $1,573 Transferred in — ?

Labor $4,618 $1,944 Overhead ? ?

Percentage of completion:

Beginning inventory 40% 50%

Ending inventory 50% 40%

Overhead in both departments is applied as a percentage of direct labor costs. In the picking department, overhead is 200 percent of direct labor. In the encapsulating department, the overhead rate is 150 percent of direct labor.

Required:

Prepare a production report for each department using the FIFO method. (Hint: For the second department, you must convert gallons to capsules.)

Cases Case