Question
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,
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 litre containers. The encapsulating department takes the powdered mix and places it in capsules. One litre 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:
PickingEncapsulating
Beginning inventories:
Physical units10 litres4,000
Costs:
Materials$252$32
Labour$282$20
Overhead56430
Transferred in-$140
Current production:
Transferred out140 litres208,000
Ending inventory 20 litres6,000
Costs:
Materials$3,636$1,573
Transferred in
Labour$4,618$1,944
Overhead92362916
Percentage of completion:
Beginning inventory 40%50%
Ending inventory50%40%
Overhead in both departments is applied as a percentage of direct labour costs. In the picking department, overhead is 200 percent of direct labour. In the encapsulating department, the overhead rate is 150 percent of direct labour.
Required:
1. Prepare a, production report for the picking department using the weighted average method. Follow the five steps outlined in the chapter. Round to two decimal places for the unit cost.
2 Prepare a, production report for the encapsulating department using the weighed average method Follow the five steps outlined in the chapter. Round to four decimal places for the unit cost.
3 Explain why the weighted average method is easier to use than FIFO Explain when weighted average will give about the same results as FIFO.
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