FIFO Method, Two-Department Analysis

Healthway uses a process-costing system to compute the unit costs of the minerals that it produces. It has three departments: Mixing, Tableting, and Bottling. In Mixing, at the beginning of the process all materials are added and the ingredients for the minerals are measured, sifted, and blended together. The mix is transferred out in gallon containers. The Tableting Department takes the powdered mix and places it in capsules. One gallon of powdered mix converts to 1,600 capsules. After the capsules are filled and polished, they are transferred to Bottling where they are placed in bottles, which are then affixed with a safety seal and a lid and labeled. Each bottle receives 50 capsules.

During July, the following results are available for the first two departments (direct materials are added at the beginning in both departments):

Prepare a production report for the Mixing Department using the FIFO method. Follow the five steps outlined in the chapter. If required, round your cost per equivalent unit answers to three decimal places and use them in subsequent computations. Round all other calculations and final answers to the nearest dollar.

Mixing Tableting Beginning inventories: Physical units 5 gallons 4,000 capsules Costs: Direct materials $120 $32 Direct labor 128 20 Overhead ? ? Transferred in - 140 Current production: Transferred out 125 gallons 198,000 capsules Ending inventory 6 6000 Costs: Direct materials $3,144 $1,584 Transferred in ? Direct labor 4,096 1,944 Overhead ? ? Percentage of completion: Beginning inventory 40 % 50 % Costs: Direct materials $3,144 $1,584 Transferred in ? Direct labor 4,096 1,944 Overhead ? ? Percentage of completion: Beginning inventory 40 % 50 % Ending inventory 50 40 Overhead in both departments is applied as a percentage of direct labor costs. In the Mixing Department, overhead is 200 percent of direct labor. In the Tableting Department, the overhead rate is 150 percent of direct labor