Appendix: Normal and Abnormal Spoilage in Process Costing, Changes in Output Measures, Multiple Departments

Grayson Company produces an industrial chemical used for cleaning and lubricating machinery. In the Mixing Department, liquid and dry chemicals are blended to form slurry. Output is measured in gallons. In the Baking Department, the slurry is subjected to high heat, and the residue appears in irregular lumps. Output is measured in pounds. In the Grinding Department, the irregular lumps are ground into a powder, and this powder is placed in 50-pound bags. Output is measured in bags produced. In April, the company reported the following data:

1. The Mixing Department transferred 51,500 gallons to the Baking Department, costing $257,500. Each gallon of slurry weighs two pounds.
2. The Baking Department transferred 103,000 pounds (irregular lumps) to the Grinding Department. At the beginning of the month, there were 4,600 gallons of slurry in process, 35 percent complete, costing $33,800 (transferred-in cost of $23,000 plus conversion cost of $10,800). No additional direct materials are added in the Baking Department. At the end of April, there was no ending work in process. Conversion costs for the month totaled $219,198. Normal loss during baking is 5 percent of good output. All transferred-in materials are lost, but since loss occurs uniformly throughout the process, only 50 percent of the conversion units are assumed to be lost.
3. The Grinding Department transferred 2,575 bags of chemicals to its finished goods warehouse. Beginning work in process for this department was 25,000 pounds, 40 percent complete with the following costs: transferred-in cost, $131,500; conversion cost, $12,000. Bags are used at the end of the process and cost $1.70 each. During bagging, normally one out of every 11 bags is torn and must be discarded. No powder is lost (the tearing occurs when the bag is being attached to a funnel). Conversion costs for the month's production are $181,720. There is no ending work in process.

Required:

1. Using FIFO, calculate the cost per bag of chemicals transferred to the finished goods warehouse. Round per-unit costs to the nearest cent. Round other solutions to the nearest unit or dollar as needed.

Baking Department (to obtain the cost of goods transferred out):

Units to account for:
Beginning work in process	fill in the blank df969906ef9cffa_1
Units started	fill in the blank df969906ef9cffa_2
Total units to account for	fill in the blank df969906ef9cffa_3
Units accounted for:
Units transferred out	fill in the blank df969906ef9cffa_4
Normal spoilage	fill in the blank df969906ef9cffa_5
Abnormal spoilage	fill in the blank df969906ef9cffa_6
Total units accounted for	fill in the blank df969906ef9cffa_7

	Equivalent Units
	Conversion Costs	Transferred In
Total equivalent units	fill in the blank df969906ef9cffa_8	fill in the blank df969906ef9cffa_9
Total unit cost	$fill in the blank df969906ef9cffa_10

Cost of units transferred out:
Started and competed		$fill in the blank df969906ef9cffa_11
Prior period costs	$fill in the blank df969906ef9cffa_12
Costs to finish	fill in the blank df969906ef9cffa_13	fill in the blank df969906ef9cffa_14
Normal spoilage		fill in the blank df969906ef9cffa_15
Total		$fill in the blank df969906ef9cffa_16

Grinding Department:

Total units accounted for

fill in the blank df969906ef9cffa_17

Note: (For direct materials: 11 bags are used to get 10 good bags).

Unit cost of units started and completed:
	Direct Materials	Conversion Costs	Transferred In	Total
Costs added	$fill in the blank df969906ef9cffa_18	$fill in the blank df969906ef9cffa_19	$fill in the blank df969906ef9cffa_20
Total equivalent units	fill in the blank df969906ef9cffa_21	fill in the blank df969906ef9cffa_22	fill in the blank df969906ef9cffa_23
Cost per equivalent unit	$fill in the blank df969906ef9cffa_24	$fill in the blank df969906ef9cffa_25	$fill in the blank df969906ef9cffa_26	$fill in the blank df969906ef9cffa_27

Unit cost of units from beginning work in process:
Prior period costs	$fill in the blank df969906ef9cffa_28
Costs to finish:
Direct materials	fill in the blank df969906ef9cffa_29
Conversion costs	fill in the blank df969906ef9cffa_30
Total	$fill in the blank df969906ef9cffa_31
Unit cost	$fill in the blank df969906ef9cffa_32	per unit