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 50,400 gallons to the Baking Department, costing $302,400. Each gallon of slurry weighs two pounds.
2. The Baking Department transferred 100,800 pounds (irregular lumps) to the Grinding Department. At the beginning of the month, there were 5,300 gallons of slurry in process, 30 percent complete, costing $41,300 (transferred-in cost of $31,800 plus conversion cost of $9,500). 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 $185,256. 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 2,520 bags of chemicals to its finished goods warehouse. Beginning work in process for this department was 24,500 pounds, 55 percent complete with the following costs: transferred-in cost, $135,000; conversion cost, $12,000. Bags are used at the end of the process and cost $1.30 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 $172,172. 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 2caa5201bfdbf81_1
Units started	fill in the blank 2caa5201bfdbf81_2
Total units to account for	fill in the blank 2caa5201bfdbf81_3
Units accounted for:
Units transferred out	fill in the blank 2caa5201bfdbf81_4
Normal spoilage	fill in the blank 2caa5201bfdbf81_5
Abnormal spoilage	fill in the blank 2caa5201bfdbf81_6
Total units accounted for	fill in the blank 2caa5201bfdbf81_7

	Equivalent Units
	Conversion Costs	Transferred In
Total equivalent units	fill in the blank 2caa5201bfdbf81_8	fill in the blank 2caa5201bfdbf81_9
Total unit cost	$fill in the blank 2caa5201bfdbf81_10

Cost of units transferred out:
Started and competed		$fill in the blank 2caa5201bfdbf81_11
Prior period costs	$fill in the blank 2caa5201bfdbf81_12
Costs to finish	fill in the blank 2caa5201bfdbf81_13	fill in the blank 2caa5201bfdbf81_14
Normal spoilage		fill in the blank 2caa5201bfdbf81_15
Total		$fill in the blank 2caa5201bfdbf81_16

Grinding Department:

Total units accounted for

fill in the blank 2caa5201bfdbf81_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 2caa5201bfdbf81_18	$fill in the blank 2caa5201bfdbf81_19	$fill in the blank 2caa5201bfdbf81_20
Total equivalent units	fill in the blank 2caa5201bfdbf81_21	fill in the blank 2caa5201bfdbf81_22	fill in the blank 2caa5201bfdbf81_23
Cost per equivalent unit	$fill in the blank 2caa5201bfdbf81_24	$fill in the blank 2caa5201bfdbf81_25	$fill in the blank 2caa5201bfdbf81_26	$fill in the blank 2caa5201bfdbf81_27

Unit cost of units from beginning work in process:
Prior period costs	$fill in the blank 2caa5201bfdbf81_28
Costs to finish:
Direct materials	fill in the blank 2caa5201bfdbf81_29
Conversion costs	fill in the blank 2caa5201bfdbf81_30
Total	$fill in the blank 2caa5201bfdbf81_31
Unit cost	$fill in the blank 2caa5201bfdbf81_32	per unit

2. Prepare the journal entry needed to remove spoilage from the Baking and Grinding departments. Round your answers to the nearest dollar if rounding is required.

	CashConversion Cost-ControlLoss Due to SpoilageWork in Process-BakingWork in Process-Mixing	- Select -
	CashConversion Cost-ControlLoss Due to SpoilageWork in Process-BakingWork in Process-Mixing		- Select -