Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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: a. The Mixing Department transferred 50,900 gallons to the Baking Department, costing $203,600. Each gallon of slurry weighs two pounds. b. The Baking Department transferred 101,800 pounds (irregular lumps) to the Grinding Department. At the beginning of the month, there were 5,900 gallons of slurry in process, 30 percent complete, costing $34,000 (transferred-in cost of $23,500 plus conversion cost of $10,400). 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 $218,736. 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. c. The Grinding Department transferred 2,545 bags chemicals to its finished goods warehouse. Beginning work in process for this department was 25,500 pounds, 30 percent complete with the following costs: transferred-in cost, $133,500; 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 $177,082. 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 11,800 Units started 101,800 Total units to account for 113,600 Units accounted for: Units transferred out 101,800 Normal spoilage 5,090 Abnormal spoilage 6,710 Total units accounted for 113,600 Equivalent Units Conversion Transferred Costs Total equivalent units 104,160 101,800 Total unit cost 4.10 369,000 Cost of units transferred out: Started and competed Prior period costs Costs to finish Normal spoilage 34,000 17,346 51,346 15,525 Total $ 435,871 Grinding Department: Total units accounted for Note: (For direct materials: 11 bags are used to get 10 good bags). Unit cost of units started and completed: Direct Conversion Transferred In Materials Costs Total Costs added 4,759 177,082 435,871 Total equivalent units Cost per equivalent unit 1.87 Unit cost of units from beginning work in process: Prior period costs 145,500 Costs to finish: Direct materials 954 Conversion costs Total Unit cost per unit
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started