6-52 LO 6-2, 6-3, 6-4, 6-6] Weighted Average Method; Two Departments Benoit Chemical Company (BCC) produces a variety of specialty chemicals used in the pharmaceutical industry and construction industry. BCC spends almost 20% 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. BCC has a small number of large customers, each of which typically has one or more large orders being processed at BCC at any given point in time. These orders are typically completed over 1 to 3 months or longer. BCC 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, and packaging. 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 74,000 gallons this month. No spoilage is measured in the mixing department, but a Page 0227 careful measurement 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 none of the costs of the spoiled units can be recovered. BCC uses the weighted-average method for process costing. Percentage completion for conversion costs is 60% in the mixing department for both beginning and ending inventory. The percentage completion for conversion costs for the reacting department for beginning and ending inventory is 30% and 40%. respectively. Work-in-Process for the two departments is as follows. Mixing Department (gallons) Reacting Department (gallons) Beginning Work-in-Process units Ending Work-in-Process units 28,000 16,500 26,000 Normal spoilage (lost gallons) 0 18,250 2,250 Costs in the mixing department: Materials Conversion Beginning Work-in-Process $ 56,480 $282,400 Current costs 288,484 989.466 Transferred-in beginning Work-in-Process costs are $242,171, and conversion costs in the reacting department are as follows: Conversion Beginning Work-in-Process $412,510 Current costs 1,245,320 $1,657,830 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' production cost reports? 4. What is BCC's competitive strategy? Explain whether or not you think the company's costing system supports this strategy.